Human Resources News & Insights

Obamacare is raising costs by how much? Survey shows expected impact

The name, “The Affordable Care Act,” doesn’t seem to be doing President Obama’s signature piece of legislation any favors. It appears to have made the law the brunt of employers’ ire because it hasn’t stopped healthcare costs from climbing as the name suggests it would.

As a result, the ACA is public enemy No. 1.

And now, instead of blaming market conditions, which had healthcare costs on the rise long before the law was passed, employers are blaming Obamacare.

One of their biggest beefs: Not only has the law not reduced costs, it has actually added expenses by way of administrative burdens.

How much is Obamacare increasing costs?

A recent survey (PDF) conducted by the Internal Foundation of Employee Benefits Plans revealed that most employers believe the ACA is driving up healthcare costs this year and — worse yet — we haven’t seen the worst of it.

By how much are employers saying the ACA will increase their health benefits costs in 2015?

  • By more than 10% — said 8% of employer respondents.
  • By 7% to 10% — said 12% of employers.
  • By 5% to 6% — said 16% of employers.
  • By 3% to 4% — said 23% of employers.
  • By 1% to 2% — said 23% of employers.

Seventeen percent of employers said they expect “no change” in their health benefits costs in 2015 due to the ACA, and just 1% said the law will decrease their costs.

The five biggest cost drivers?

  • General administrative costs — said 56% of employers.
  • Reporting disclosure and notification requirements — said 37% of employers.
  • Patient-Centered Outcomes Research Institute fees — said 33% of employers.
  • ACA-related plan design changes — said 20% of employers.
  • Health insurance provider fees — said 18% of employers.

Worst is still to come

As bad as all that looks for 2015 health benefits costs, the worst of the increases are still to come, according to 71% of employers.

The breakdown looks like this:

  • 33% of employers say the largest ACA cost increase will come in 2016.
  • 11% believe it’ll come in 2017.
  • 27% believe it’ll come in 2018.

The biggest cost driver in the future? Gearing up for the excise “Cadillac Tax” on high-cost health plans, which takes effect in 2018.

Will employers drop coverage?

The good news, at least for employees, is that despite their belief that costs will continue to climb, the majority of employers don’t plan on dropping their health benefits anytime soon.

When asked how likely it would be that they’d still be providing health benefits in five years:

  • 52% said it was “very likely”
  • 33% said they “definitely will”
  • 11% said they were “somewhat likely”
  • 3% said they were “somewhat unlikely,” and
  • 1% said they were “very unlikely.”

Zero said they “definitely won’t” be providing health benefits five years from now.

The top 5 reasons for continuing to offer coverage:

  • To attract talent — said 79% of employers.
  • To retain current employees — said 75% of employers.
  • To maintain/increase employee satisfaction and loyalty — said 53% of employers.
  • To maintain/increase productivity — said 14% of employers.
  • To avoid paying penalties — said 14% of employers.
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