SURVEY SAYS: What Will Offset Healthcare Coverage Cuts?

June 9, 2011 ( - The McKinsey study reported earlier suggests that some major changes could be afoot in employer-sponsored health care coverage. 
Setting aside for a minute whether or not your employer would drop health care insurance (see McKinsey Finds Growing Number of Employers Likely to Drop Health Coverage) – this week I asked readers to assume that their employer WOULD drop health care insurance – and asked them what, if any, offset there might be for that cut.

A majority of this week’s respondents – but only a bare majority (53.9%) thought that they would get a bump in pay, but one that would likely not be enough to offset the value of the coverage. 

In fact, just 7.8% thought there would be a bump in pay equal to the offset between the value of the benefit and the value of coverage via one of the exchanges, while another one-in-twenty (4.9%) expected a bump in pay equal to the value of the benefit – at least initially. 

Another 15.7% said there would probably be no offset in pay or benefits, while 3.9% thought there might be some offset (say, an increase in the 401(k) match).

And then there were the 13.7% that admitted “I’ve no earthly idea.”


There were, of course, some in the “other” category, including:

The company would take two approaches: for executives, they will have a bump in pay. Everyone else will not. It's the culture here.

“A carefully crafted and strategically worded e-mail which explains that "our parent company doesn't make money by writing a lot of checks."

“Combo of some pay and some obscure benefit most won't sign up for (hence little employer cost)”

“Depends on the company. Some will offset the value (i.e. make the employee whole), others will take a profit.”

“The offset in the 401K match would not be equal to the value of health benefits

Or there was the reader who, asked to assume it was going to happen, chose instead to say “Just ain't gonna happen. The 'entitlement' to US employer provided health care is as unsinkable as the Titanic.”


We know that health care benefits are today a competitive advantage for employers, and that, in some (perhaps many) cases, workers take/stay in jobs they don’t like to retain those benefits.  So, staying with the original premise, I asked readers – if somewhere around a third to half of employers that currently offer health insurance coverage drop it – would that provide a competitive advantage to those who continued to offer the benefit.

A plurality of this week’s respondents (42.3%) said it would be, and the vast majority were willing to concede that, depending on circumstances it would be:

30.8% - Probably, but it depends on the value of the coverage - and the alternatives

 8.7% - Probably, but it depends on the value of the coverage

 5.8% - Probably

On the other hand, 6.7% offered a milder “Perhaps - but things like pay, security, rewarding job will matter more”, while 3.8% said “probably not”, and nearly 2% said “no.”


There were, as you might imagine, some interesting, thoughtful, and provocative verbatims:

I think there are a number of large companies that would use ANY excuse to cut benefits and/or pay.

Employers will likely move to some kind of supplemental plans.  It remains to be seen what the new market would offer in the future.

I think that employment-based healthcare coverage will continue to be offered by most employers and by employers of choice.  It’s been around so long and is now expected.

It will continue to increase in cost to both the employer and employee with a high perceived value given the alternatives.  Employers who drop it will find their employees either underinsured and at risk of financial ruin given an unfortunate sickness or injury, or scrambling to find alternatives which are often inadequate and expensive.

I believe that employers who continue to offer health care coverage will have a huge advantage.  And maybe that will be enough to convince other employers to continue the coverage.

It's all part of the (multi-step) plan, to bring the entire industry under bureaucratic control.  Doesn't anyone in DC understand the flaws in making open-ended promises?

Smaller companies will reject health benefit coverage once the rules get so complex that no one will understand which end is up.  The penalty is far more cost effective.

Anything the government gets involved in is a disaster.  This will be no different.  It will end up like the tax code, have special exceptions and subsidies, and cost the tax payers a fortune.

I doubt that most employees would look for another job just because of a change in their health insurance coverage, esp. with the new law taking full effect. But what a firm offers could very well be a strong selling point for employees looking to change jobs anyway.

If there is a mass exodus of employers sponsoring health benefits, we will see an out cry for the government to provide health care.  It may be the single largest push to a single payer health care system.


The days where employers look out for the employees are over.  As with the 401(k) matching contribution departure when times were tough, (my company has yet to restore the match), I believe many will jump on the band wagon to drop health coverage.  It's just another take away that employees will have to endure.  For those lucky enough to receive an offset in the form of a compensation bump, the sting will be a little less.  I won't be holding my breath.

Healthcare coverage has undergone changes during the last 10 years.  As income became less, many smaller employers have determined an equal amount to give to all employees (usually enough to cover or come close to the lowest level of monthly insurance premiums); and unless you're high management with an employment agreement stating that the company picks up the total premiums, employees are footing the bill for the balance of the premiums.  I think we are moving toward more benefit "package" deals.

Over a year ago, comments made by our HC group indicated that if the legislation goes through in its final form through 2014, that we would drop coverage. After paying the penalty and providing employees with a significant sum to buy their own insurance, we would still save millions of dollars.

The first thing out of the gleeful mouth of our VP of HR when this the original bill hit the news was that it would be cheaper to pay the fine and drop the coverage - pretty sure we'll be in that 30%.  On your second question, some of the choices will apply to executives and management but in manufacturing, at least, the rank and file are going to look for other jobs that provide insurance, even if that is not their best choice.  Perception is everything.

If a "national" plan of some sort ever comes into effect, I think many employers will drop this expensive benefit.  I also think that if an affordable national plan is available, a number of people will quit their jobs and do something else (e.g., start their own business) because they're just holding on for this benefit.

"What will happen to Agents and administrators?  Will they go by the wayside? 

Price of care had better come down because I can't afford what we have now; $5,000 deductible!  I can't afford my $250/month asthma medication and I only go to the Dr. when I'm on death's door.  So much for good healthcare for all!"


Our organization is about 2/3 professional and 1/3 semi-skilled. Our pay is "competitive" but our benefits are better than most in our industry and category.  Benefits have been a great recruiting tool for us.  I'm hoping we will keep our benefits, but we can't if everyone else stops.  Our semi-skilled (who happen to be in CBA) live from paycheck to paycheck (some of our others, too, I suppose) and would never be able to manage paying for their own healthcare coverage.  I anticipate that if employees choose other coverage, we will still end up administering it.  They will continue to include this in their contract.  Many of our employees are "older" so demographically it would be hard for them to get other coverage as good as ours for the same price.  Cynically, it is my opinion that the true plan of PPACA is to get to a single-payer system and end up with rationed care.  I hope I'm wrong and I'm glad I'm old.

In the year 2020, doctoral theses will be written on how Obamacare reshaped the business landscape.  Will they be praising the results or assessing the damage?

When the value of this benefit is disclosed on the form W2, this is going to be a huge competitive advantage because employees will see the size of the benefits they are truly receiving.

Employees still do not understand the dollar value of health coverage.

As soon as one company in our industry drops medical coverage, it will be a race to the bottom as most of the rest claim that they, reluctantly, have to drop it in order to remain competitive.  Of course, somehow the top guys will still have coverage (so that their compensation remains "competitive"), but the rest will be on their own. Employers realized some time ago that they could reduce benefits as long as everyone else is doing it, and say that it's competitive and shareholder friendly.  I suppose it is, but I haven't really seen the medical program that is going to replace it.  The upside, or downside, depending on your perspective, is that it may lead the country to adopt a true, decent, and competitive national healthcare plan that is not directly tied to employment.  Then we just have to figure out how to pay for it.


I have a dream.....that someday politicians will understand that when you squeeze a balloon, it either pops out on the other end, or it completely bursts.  Since this will never happen in my lifetime, I have no doubt that significant changes will come in the future - none for the better.

It's a dinosaur and will be replaced by a single payer system eventually (although maybe not in my working lifetime).

I thought you were going to ask what would workers do?  The answer there is simple, nothing...maybe bitch and moan for a few days, but then go back to their iphones, "reality" TV shows and obsession with Hollywood idols.  We have a precedent for this...the demise of defined benefit pension plans.  Nobody complained about their demise, except those who saw the loss of asset value to employees...and they were few and unheeded.

Employers continuing to offer group healthcare coverage will be preferred over those who do not. The perception will be "this is a good employer who cares about its employees."   Few employees like making  their own purchasing decisions about health care plans  -- witness the results of open enrollment each year where the vast majority continue  "same as last year" by default because they don't bother to even open the materials (or go to the enrollment website) --  even though another option may actually be better for them.

The direction it is headed currently, I think makes it likely that we will ultimately have no ESI, which would not entirely be a bad thing.   I haven't liked the insurance at the last two places I worked and would have liked to have had the chance to purchase what I wanted at a comparable rate.   Before the recent law changes, insurance companies could charge individuals with health problems more, or simply refuse them outright.   I don't like all the new provisions, but at least we're finally making changes.

I'm not sure why this concept is so new to people, especially baby-boomers. "When I was a kid..." there was catastrophic coverage, only. You took care of your day-to-day health care expenses. My neighbor was the town doctor and my uncle the pharmacist. On occasion they did get paid with chicken, a side of beef, home/car repairs and the like (of course, only after walking 3 miles up hill - both ways).


Some of my favorites:

McKinsey Report - isn't that a study about s.ex?  (Maybe Irish s.ex?)

I'm glad I'm almost 65 and can get into Medicare while it's still there.

When the value of this benefit is disclosed on the form W2, this is going to be a huge competitive advantage because employees will see the size of the benefits they are truly receiving.

But this week’s Editor’s Choice states a simple, but powerful fact:  Employees still do not understand the dollar value of health coverage.”

Thanks to everyone who participated in our survey!