Smaller Firms Fear Health Care Reform Cost Hikes

July 29, 2010 (PLANSPONSOR.com) – Forty-nine percent of employers with 500 or fewer workers forecast significant health care cost hikes in the near future as a result of federal health care reform, according to new Fidelity Investments research.

A Fidelity news release about its survey indicated that 25% of organizations with 500 or more employees were likewise concerned about sizable health cost increases linked to the reform law.

“Company executives are taking a close look at their overall benefit strategies in the wake of the new health care reform legislation,” said Sunit Patel, senior vice president of Fidelity’s Benefits Consulting services, in the announcement. “Over the long run, health care reform could lead to significant changes to an employee’s benefits well beyond health care coverage. There is a lot of confusion out there about the real impact of the health care legislation and the accompanying costs. Depending on a company’s strategy in designing its future health plans, cost increases can be minimized.”

According to Fidelity, 64% of organizations said they are not considering dropping health coverage because of the reform law, but 20% indicated they are pondering just such a move. Twenty-two percent of smaller companies and only 14% of larger organizations said they may drop their health policies.

Most respondents agreed that health care coverage remains an important tool to attract and retain employees. More than eight out of ten employers (85%) said that health care benefits will either continue to be just as important, or more important, in the future.

When asked about the health plan design that would be most attractive to their organizations, 55% of the larger employers chose a high deductible health plan (HDHP), followed by a preferred provider organization (PPO) (45%), and a health maintenance organization (HMO) (18%). If the respondent’s organization was already using an HDHP as one of their health care options, they were more likely to consider this plan type to be the more likely option for the future, with 60% of this group choosing HDHP as making the most sense for their organization.

The survey of 459 employers was conducted June 10 to June 30 by Fidelity’s Benefits Consulting group.

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