July 27, 2012 (PLANSPONSPOR.com) - No advantages exist for employers to eliminate group health benefits and accept Patient Protection and Affordable Care Act (PPACA) penalties, according to a
Truven Health Analytics’s report, “Modeling the Impact of ‘Pay
or Play’ Strategies on Employer Health Costs,” found employers will bear a
burden of as much as $17,269 per employee (roughly $9,000 more than they
currently spend) to shift their benefits to federally subsidized coverage
obtained through a federal exchange in 2014 rather than continuing existing
group health plans.
If employers choose to eliminate group health without
providing a subsidy to employees to obtain coverage through an exchange,
then employer costs would fall to $2,000 per employee—the cost of fines imposed by
the PPACA for not providing coverage to employees—but each employee would be
responsible for paying an average $16,551 a year for health coverage in
2014. Because employers must provide market value in order to retain skilled workers,
this cost differential should encourage most companies to continue offering
group health benefits, Truven said.
“This research proves, once again, that when employers invest
in the health and wellness of their employee populations, they end up spending
less on health care,” said Raymond Fabius, M.D., chief medical officer at Truven
Health Analytics. “Not only is eliminating group health coverage not cost
efficient, it would have an enormous negative impact on an employer’s
competitive market position and—eventually—on the well-being of its
The white paper examined insurance claims and wage data from
33 large employers with 933,000 employees.
The full report is available here.