The average family’s health benefits now cost more than $20,000, according to a new report from Milliman, a consultancy. American workers pick up about $8,500 of that tab, and their employers cover the rest.
President Obama’s healthcare law may unwittingly offer companies some relief from that obligation — by encouraging them to discontinue offering health insurance. If employers take the bait, then Americans accustomed to getting coverage through work may have to find it on their own.
A new House Ways and Means Committee report estimates that the 100 biggest American firms could save nearly half a trillion dollars over the next decade by dropping health coverage for their employees and foisting them onto public insurance exchanges, which, unless the entire law is overturned by the U.S. Supreme Court in late June, are set to become operational in 2014.
The Committee surveyed 71 Fortune 100 companies and found that they spent $5,197 on health insurance per employee in 2011, on average. The cost of insuring an employee’s entire family was, of course, even higher. By the time the insurance exchanges open, the average worker’s insurance will cost his employer $6,500.
These estimates may be low. The cost of an employer-based insurance plan has increased by 112% over the past decade. And 84% of employers expect healthcare costs to increase at rates greater than those they’ve experienced over the past five years.
Reasons for the increases include Obamacare’s provision that insurers keep children on their parents’ plans until age 26, the ending of price discrimination for patients with pre-existing conditions, and mandated coverage of free preventive care.
Employer-provided coverage is already becoming rarer. A recent study from the Employee Benefit Research Institute found that the number of private-sector employers offering health benefits to their workers has steadily decreased. In 2010, about 47% of wage and salary workers reported that they worked for employers that didn’t furnish health benefits. Another 15% weren’t eligible for those available.
Obamacare aims to change that by mandating that all employers with more than 50 workers provide insurance coverage. But it only fines them $2,000 per employee, with certain exceptions, if they don’t.
So the cost of insuring an employee in 2014 will be more than triple the penalty for not doing so.
That gives employers an enormous financial incentive to scrap coverage.
In 2014 alone, the Fortune 100 companies could save $28.6 billion by dropping their workers onto the exchanges, according to the Ways and Means Committee report. By 2023, the savings could collectively reach $422 billion.
