Many U.S. employers to drop health benefits: Expert

But majority of employees would stay at organization
By Susan Kelly
||Last Updated: 06/07/2011

(Reuters) — At least 30 per cent of employers are likely to stop offering health insurance once provisions of the United States health-care reform law kick in in 2014, according to a study by consultant McKinsey.

McKinsey, which based its projection on a survey of more than 1,300 employers of various sizes and industries and other proprietary research, found that 30 per cent of employers will "definitely" or "probably" stop offering coverage in the years after 2014, when new medical insurance exchanges are supposed to be up and running.

"The shift away from employer-provided health insurance will be vastly greater than expected and will make sense for many companies and lower-income workers alike," according to the study, published in McKinsey Quarterly.

"While the pace and timing are difficult to predict, McKinsey research points to a radical restructuring of employer-sponsored health benefits."

Among employers with a high awareness of the health reform law, the number likely to drop health coverage for workers rises to more than 50 per cent, the report predicted.

The numbers compare to a Congressional Budget Office estimate that only about seven per cent of employees currently covered by employer-sponsored plans will have to switch to subsidized-exchange policies in 2014, said McKinsey.

The consultant also found at least 30 per cent of employers would gain economically from dropping coverage even if they compensated employees for the change through other benefit offerings or higher salaries.

Losing employer-sponsored insurance would not prompt workers to leave their jobs, contrary to what many employers assume, McKinsey also predicted. The study found more than 85 per cent of employees would remain at their jobs even if their employer stopped offering insurance, although about 60 per cent would expect increased compensation.

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