Health Care Reform Will Increase Costs, Reduce Benefits, Towers Watson Surveys Find

NEW YORK, N.Y., January 27, 2010 — A significant majority of U.S. employers believe health care reform, if enacted, would lead to higher costs for both employer-sponsored benefit programs and health care services overall, according to initial results from an employer survey conducted by Towers Watson and the National Business Group on Health. A separate Towers Watson survey of U.S. employees found that a majority of workers think health reform will not only lead to higher costs, but decrease the quality of care and reduce the benefits available to them.

“Although the status of legislative health care reform is currently in limbo, it’s clear that employers and employees alike are concerned over the potential impact reform could have on health costs and their benefit programs,” said Ron Fontanetta, Towers Watson Health and Group Benefits practice leader for Intellectual Capital Development. “While health reform could ultimately provide greater access to health care to more Americans, there is a fair amount of skepticism over whether health reform will be able to curb rising health costs.”

The Towers Watson – National Business Group on Health survey found that nearly three-fourths (71%) of employers believe health reform will increase the overall cost of health care services in the United States, while 69% believe it will increase the cost of their benefit programs. Additionally, more than one-third (35%) say health reform will lead to fewer employers offering subsidized benefits. Nearly half (46%) of employers believe it will decrease employer-sponsored offering of retiree medical benefits, while very few — only 5% — say it will increase, and just 27% of employers say it will cause no change.

“These survey data confirm quantitatively what many people — employers, employees and policy pundits — have been talking about for the past four months. That is, whatever else a health care reform plan might do, it is unlikely to control health care costs, which has everyone worried,” said Helen Darling, President of the National Business Group on Health.

On balance, there are some pluses and some minuses in employers’ views and expectations from health care reform. On the one hand, roughly one-fourth (27%) believe it will lower health care quality and decrease the value of benefits that employers offer, but 39% and 40%, respectively, say it will have no change in these areas. On the other hand, a majority (71%) believe health care reform will increase access to health benefit coverage. In other encouraging outcomes, 34% believe it will increase transparency of provider prices, and 30% say it will increase the transparency of provider quality.  Additionally, just over one-third (34%) believe health care reform will increase adoption of total replacement consumer-driven health plans (CDHP) by large employers, while only 9% believe adoption will decrease, and 27% believe there will be no change.

The separate Towers Watson survey of approximately 1,000 workers at midsize and large U.S. companies found similar concerns over health reform. Two-thirds (67%) believe health reform would result in higher benefit costs, while more than one-half (54%) believe it would reduce their available benefits and lower the quality of health care (53%).

This survey also found that 40% of employees would not be comfortable purchasing their own insurance in the reformed markets as an alternative to getting coverage through their employer. The current legislation proposals include a mandate for all individuals to have health insurance coverage, which ultimately could impact employees who currently receive insurance from their employer ¾ if the employer decides to terminate the company plan and pay into the system instead.

“All eyes remain on Congress, and there will likely be trade-offs in whatever final legislation emerges from their negotiation process,” said Steve Raetzman, senior consultant for Towers Watson. “However, with or without health care reform, employers will continue to look for ways to control rising health care costs and provide high-quality health care for their workers and families.”