Survey: 61% of employers expect cost increase from healthcare law

More than 60% of U.S. employers in a new survey anticipate some increase in their health benefit costs because of the federal Affordable Care Act.

The survey of 1,203 employers by the Mercer consulting firm found that 20% of those businesses expect an increase of 5% or more as new rules for workplace coverage take effect in 2014. An additional 41% of employers anticipate that costs will rise less than 5%.

Healthcare experts say any additional costs will be hard for many California employers to absorb. The average premium for employer coverage in California has increased 154% over the last decade, more than five times the 29% increase in the state’s overall inflation rate.

Mercer said employers in retail and hospitality, which often have large numbers of part-time and lower-paid workers, will be among those most affected by the healthcare law. Employers will be required to extend coverage to all employees working 30 hours or more per week or face possible penalties, Mercer said.

“Extending coverage to more employees will be a significant new expense for these employers,” said Tracy Watts, Mercer’s U.S. healthcare reform leader, “especially because other provisions [of the law] regulate how much an employer can require employees to contribute to the cost and how good the coverage must be.”

McDonald’s Corp. said last month that each of its 14,000 U.S. restaurants may incur about $10,000 to $30,000 in added annual costs because of provisions in the federal law. The Oak Brook, Ill., company said the impact would vary based on how many workers each restaurant has and how many sign up for coverage.

Supporters of the healthcare law say expanding coverage to an estimated 30 million uninsured people nationwide should help reduce healthcare costs by enabling them to receive more preventive care and to avoid costlier emergency room visits.

Rising medical costs and a weak economy have taken a toll on many employers’ ability to offer benefits at all. The percentage of California employers providing coverage has declined from 73% in 2009 to 63% last year.

“While there are a number of potentially valuable cost-containment elements of the Affordable Care Act, the reality is unless something more is done there will still be upward pressure on healthcare costs,” said Bill Kramer, executive director for national health policy at the Pacific Business Group on Health, a nonprofit coalition that includes large employers such as Boeing Co. and Walt Disney Co.

“The unfinished business of health reform is cost containment,” Kramer said.

Overall, 6% of employers surveyed said they were likely to stop providing health benefits after government-run insurance exchanges open in 2014. That rose to 9% among retail and hospitality employers.

California’s health benefit exchange is expecting more than 4 million people in the state to obtain coverage through the online marketplace. The exchange is developing a marketing campaign designed to inform individuals and small businesses in California about their options and availability of federal subsidies under the healthcare law.

Meantime, many employers are rethinking their healthcare strategy in the face of escalating premiums and new requirements under the federal law.

Some businesses are opting for smaller networks of doctors and hospitals that restrict workers’ choices and require employees to pay more to see higher-cost medical providers. Other employers are arranging for teams of doctors and nurses to focus more attention on high-cost patients suffering from multiple chronic conditions. And more employers are considering self-insuring for heath benefits, which exempts them from some provisions of the Affordable Care Act.

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