1 in 3 Employers to Drop Health Care

Study: 1 in 3 employers to drop health care
A report by McKinsey & Co. has found that 30% of employers are likely to stop offering workers health insurance after the bulk of the Obama administration's health overhaul takes effect in 2014. The findings come as a growing number of employers are seeking waivers from an early provision in the overhaul that requires them to enrich their benefits this year. At the end of April, the administration had granted 1,372 employers, unions and insurance companies one-year exemptions from the law's requirement that they not cap annual benefit payouts below $750,000 per person a year. But the law doesn't allow for such waivers starting in 2014, leaving all those entities-and other employers whose plans don't meet a slate of new requirements-to change their offerings or drop coverage. Previous research has suggested the number of employers who opt to drop coverage altogether in 2014 would be minimal. But the McKinsey study predicts a more dramatic shift from employer-sponsored health plans once the new marketplace takes effect.

Starting in 2014, all but the smallest employers will be required to provide insurance or pay a fine, while most Americans will have to carry coverage or pay a different fine. Lower earners will get subsidies to help them pay for plans. In surveying 1,300 employers earlier this year, McKinsey found that 30% said they would "definitely or probably" stop offering employer coverage in the years after 2014. That figure increased to more than 50% among employers with a high awareness of the overhaul law. Behind the expected shift is the fact that the law will give Americans new insurance options outside the workplace, and carriers will no longer be allowed to deny people coverage because they have been sick. McKinsey found that reduced the moral obligation employers may feel to provide coverage. (Read more from The Wall Street Journal)