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Moving forward: Companies speak out on health care reform - 4. Offsetting costs - EY - United States

Moving forward: Companies speak out on health care reform4. Offsetting the costs of health care reform

76% of survey respondents said they are at least somewhat likely to increase the employee-paid portion of health care coverage.

Summary: At the time of the survey, 92% of respondents said their companies were not considering discontinuing employee health care benefits, but 76% of respondents said their companies are at least somewhat likely to increase the employee-paid portion of health care coverage.

At the time of the survey:

  • 92% of respondents said their companies were not considering discontinuing employee health care benefits.
  • 8% said they were considering discontinuing employee health care benefits; some respondents explained that the decision whether to continue providing benefits would depend on market norms in the future.

For companies that were considering discontinuing employee health care benefits:

  • 53% said that concerns about negative reactions from employees were very important in their decision-making
  • 44% said competitive practices were very important in their decision-making
  • 34% said taxes under the health care law for not providing coverage were very important factors in their decision-making

Our findings indicate that, at least for the immediate future, employers will continue to offer benefits to their employees and will remain the primary source of health care coverage in the US. In 2009, 56% of US residents obtained their coverage through employer-sponsored plans, according to the most recent U.S. Census data.

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As companies come to terms with the law’s requirements, employers face important decisions about the future structure of their benefit plans, recruitment and retention strategies, tax implications and supporting operational requirements.

Initial considerations should focus on understanding the implications of the law as passed, and also on analysis of the implications of the law over the next few years. Preparing for these changes will require developing long-term projections on workforce composition and trends, anticipated benefit and health care costs, and potential coverage options.

As companies take stock of the full financial implications of the law, they are considering a variety of cost reduction strategies.

Notably, 76% of survey respondents said they are at least somewhat likely to increase the employee-paid portion of health care coverage.

Employers also are considering changes to benefits packages, although few respondents said they likely would eliminate dental or long-term care coverage. Retiree drug coverage is the benefit respondents said their organizations were most likely to eliminate; 20% of respondents said they were at least somewhat likely to eliminate it.

Business model changes
to offset costs

At the same time, businesses are looking outside of health care to offset increased health care costs.

  • 76% of survey respondents said they were at least somewhat likely to reduce business’ inefficiencies in response to increased health care costs
  • 61% said they were at least somewhat likely to reduce supply chain costs
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