End of Employer-Provided Healthcare: By 2020, S&P 500 Companies May Dump 90% of Workforce into Obamacare

Companies did not always provide healthcare benefits. But over time, employer-provided healthcare became an expectation, if not a "right".

That trend, especially with part-time workers has reversed. Some argue that by 2020, healthcare coverage may go full circle.

For example, please consider the McClatchy article Report: large employers could shift nearly all workers’ health coverage to marketplace by 2020

A new investor report predicts that Standard & Poor's 500 companies could shift 90 percent of their workforce from job-based health coverage to individual insurance sold on the nation's marketplaces by 2020.

If all U.S. companies with 50 or more employees followed suit, they could collectively save $3.25 trillion through 2025, according to the report by S&P Capital IQ, a division of McGraw Hill Financial.

Standard & Poor's 500 companies could save $689 billion over the same period if they did likewise, the report found. Savings for S&P 500 companies could top $800 billion if health care inflation remains at the traditional 7.5 percent rate over the next decade, the report estimates.

"Once a few notable companies start to depart form their traditional approach to health care benefits, it's likely that a substantial number of firms could quickly follow suit," the report noted. "The result would be a dramatic departure from the legacy employer/employee payroll deduction benefit provision relationship, and could quickly be the modern day equivalent of companies moving from defined benefit pension plans to defined contribution programs."

The transition to marketplace coverage won’t take long, the report predicts. Ten percent of S&P 500 workers will shift coverage by 2016, 30 percent by 2017, 70 percent by 2019 and 90 percent by 2020.

Low- and middle-income workers, who already get a sizable federal subsidy to help them purchase marketplace coverage, are the most likely to be steered into the exchanges. But higher-income employees "will eventually be pushed towards the (marketplaces) and will be provided a stipend to help cover costs," the report predicts.

The projections are not etched in stone. Individual companies will decide when and how any such coverage transitions will be made. The projections could also change over time as the Affordable Care Act is amended and modified.

“Whether the current version of the ACA remains intact or is amended,” the report said, “the burden of acquiring or providing health benefits is sure to shift more from the employer toward the individual or employee, with varying degrees of support from the government, as time passes.”

Here are references to the report, none of which contains a link to the report.

• McClatchy: Report: large employers could shift nearly all workers’ health coverage to marketplace by 2020.
• New York Times: Envisioning the End of Employer-Provided Health Plans
• Yahoo: Thanks to Obamacare, more companies are likely to dump health benefits
• Politico Pro: Requires login
• Advisory: Report claims 90% of employers could shift workers to exchanges by 2020

The articles essentially read the same. It's as if someone published the story and everyone copied it, referring to "the report".

Advisory had additional comments supporting and in disagreement with the report...

S&P Capital IQ Managing Director Michael Thompson says, "We still expect some companies to hold on to their health care plans. ... But we think that the tax incentives for employer-driven insurance are not enough to offset the incentives for companies to transition people over to exchanges and have them be more autonomous around management of their own health care."

"For most firms, there isn’t a net gain to dropping coverage for active workers," according to David Cutler, a Harvard economist who was an advisor to the White House during the ACA negotiations. "The subsidies are more than offset by the higher taxes workers will pay"

Report Believable?

Is the report believable? I think so, but I would prefer to read the entire study. If I can get a copy with permission to list it or excerpt it, I will do so.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com