Health care reform: How companies need to worry

Health care reform: How companies need to worry

How companies need to worry.

  • min read


Health care reform: How companies need to worry

Employee retention needs to be a major part of their calculations.

Most people have heard the noisy debate about the extent to which the health care reform legislation passed earlier this year will burden businesses. But on the flip side, the reform initiatives also underscore the necessity to re-examine social contracts between employer and employee. At this watershed moment, employers must determine how tomorrow's health benefits will help them attract and retain talent.

Employers have always played a key role in health in the U.S. as active agents on behalf of their employees. In 2008, 61% of non-elderly Americans had an employment-related health insurance policy; currently, the estimate runs at around 59%. But few companies understand how much they rely on health benefits to attract and retain quality talent. Today 74% of employees consider health benefits a key reason for their loyalty to employers, second only to their salary, according to industry research. On the flip side, most companies underestimate the true economic cost of employee churn. Bain & Company analysis shows that the "turnover tax" on corporate earnings, though invisible in most accounting systems, is larger than current state or federal tax.

Now the Patient Protection and Affordable Care Act offers companies the chance to revisit the connection between health care benefits and employee retention. At its core, the legislation pursues two goals. First, it increases access to health insurance through the expansion of public programs, employer and individual mandates and federal subsidies. Second, it pushes for greater transparency in a more regulated health insurance industry. The government has always used the tax system to encourage employer-provisioned health insurance, but the PPACA adds incentives via mandates, subsidies and transparent purchasing channels. Employers with more than 50 full-time employees must provide coverage or be subject to fines. For smaller businesses, employing fewer than 25, the PPACA promises temporary coverage subsidies for lower-income employees.

Short term the legislation feels onerous to businesses, and for good reason. Most already consider their health costs crippling. By 2015, Bain & Company estimates, employer health costs could rise more than 60% from current levels. That's almost three times the expected growth in real wages and overall inflation during the same period. A majority of employers, nearly 70% according to industry surveys, expect the reform law to lead to higher health costs, which it undoubtedly will, because of elements like expanded coverage for dependent children, the elimination of pre-existing condition clauses and the enrollment of more than 30 million uninsured. Not surprisingly, even though health reform mandates don't kick in until 2014, many employers have already begun modifying their health benefits.

In doing so, they face several choices . . . .

Read the full article on


Ready to talk?

We work with ambitious leaders who want to define the future, not hide from it. Together, we achieve extraordinary outcomes.