Lockton Executive Says Employers Wary of Health Reform Costs

Testifies to Congress, Releases Study of Cost Pressures on Employee Benefit Plans

Mar 10, 2011, 17:44 ET from Lockton Benefit Group

KANSAS CITY, Mo., March 10, 2011 /PRNewswire/ -- Mike Brewer, President of Lockton Benefit Group, urged a U.S. House Committee today to help employers reduce the costs and administrative burdens of the health reform law passed last year.  

(Logo:  http://photos.prnewswire.com/prnh/20090415/CG99351LOGO)

"Our clients find that the health reform law makes what is already a costly and administratively burdensome endeavor—the sponsorship of a simple group health insurance plan—even more expensive and more hassle-prone," Brewer told the U.S. House Education & Workforce Committee's Subcommittee on Health, Employment, Labor and Pensions.  "Our clients wish that Congress would work to make an employer's provision of health insurance easier and less costly, rather than more expensive and more burdensome."

In conjunction with the hearing, Lockton Benefit Group released an actuarial modeling study of more than 130 employee benefit plans that shows that the health reform law imposes additional costs on employers' health plans.  The study also shows that the law will create a financial incentive for some employers to terminate health benefit plans in 2014 when new Insurance Exchanges take effect. See the report, "Employers Wary of Health Reform Costs and Hassles."

"Employers are burdened and frustrated by aspects of the health reform law that add costs to their health plans," said Brewer.  "Some employers will eliminate group health coverage and full-time jobs in 2014 because of the law."  

Brewer told the House Subcommittee, "Across all industry segments in our book of business, clients will have a significant financial incentive to terminate their group coverage once the Insurance Exchanges present employees with another subsidized health insurance option. The vast majority of our clients currently spend far more on health insurance per employee than the nondeductible penalty under the 'play or pay' mandate. By 2014, this gap will be much larger still."

"Thus far, few clients have told us they definitely intend to terminate group coverage in 2014, when Exchange-based coverage becomes available," Brewer testified. "Similarly, few clients have told us they definitely intend to maintain their group coverage. The majority of our clients tell us they will wait and see. What they will do in 2014 depends on their health insurance costs and budget in 2014, and their perceived need to use a health plan to gain a competitive advantage for labor. With regard to this latter point, many clients have told us, 'We won't be the first to drop coverage, but we won't wait to be third, either.'"  See a brief portion of Mike Brewer's testimony here.

Lockton actuaries modeled the impact of health reform for hundreds of its clients, and aggregated results from 136 of those analyses into a report that examines the impact of the health reform law on middle-market health plan sponsors.  The report includes a variety of industry segments, including construction, government, healthcare, manufacturing, professional services, transportation and retail and entertainment.  See the report here with industry comparisons.  

The modeling project assesses the additional costs for employers and employees in their current health plans due to changes imposed this year by the health reform law.  It also evaluates the financial implications of options employers will have in 2014 when they are required by to offer health coverage to full-time employees or risk penalties.  

Lockton is the world's largest privately held insurance broker. Lockton advises more than 2,500 U.S. companies and organizations on their employee benefit programs.  Lockton's Health Reform Advisory Practice provides guidance to clients on the impact of health reform on their businesses.

For a full webcast of the one-hour hearing, see the U.S. House Education & Workforce Committee. http://edworkforce.house.gov/Calendar/EventSingle.aspx?EventID=227131

About Lockton

More than 3,800 professionals at Lockton provide more than 15,000 clients around the world with insurance, benefits, surety and risk management  services, offering an uncommon level of client service. From its founding in 1966 in Kansas City, Missouri, USA, Lockton has grown to become the largest privately held insurance broker in the world  and the 9th largest overall. Business Insurance recognized Lockton as a "Best Place to Work in Insurance". You can learn more at www.lockton.com 

SOURCE Lockton Benefit Group