Nearly One-Third of Employers to Stop Offering Insurance After 2014

June 8, 2011

Shubham Singhal, Jeris Stueland and Drew Ungerman of McKinsey & Co., a consulting firm, have conducted a survey of over 1,300 employers across the country and found that "30 percent of employers will definitely or probably stop offering [employer-sponsored insurance] in the years after 2014."  Among those with a "high awareness of reform," more than 50 percent will do so, says Avik Roy, an equity research analyst at Monness, Crespi, Hardt & Co. in New York City.

  • McKinsey's numbers jibe with those of the Urban Institute, which published a study fearing that "droves of employees -- potentially tens of millions -- are likely to shift out of employer-provided health insurance over the next decade or two, especially as newer firms and their employees find it more profitable [to do so]."
  • This, despite the fact that the new health reform law forces all employers of 50 or more workers to provide health insurance to their employees, or face a steep fine of $2,000 per worker.

Now, in theory, it's a good thing for more people to buy health insurance for themselves, rather than through their employers.  The problem is that, under the new reform law, a huge chunk of the country will be eligible for government subsidies if they buy insurance on their own.  If more people attempt to take advantage of those subsidies than the government projects, and employers recognize they will save money by dumping their workers onto the federal dole, the Congressional Budget Office has underestimated health reform's costs by trillions of dollars, says Roy.

Source: Avik Roy, "McKinsey: 30% of Employers to 'Definitely or Probably' Stop Offering Health Insurance after 2014," Forbes, June 6, 2011.

For text:

http://blogs.forbes.com/aroy/2011/06/06/mckinsey-30-of-employers-to-definitely-or-probably-stop-offering-health-insurance-after-2014/

For McKinsey & Co. study:

http://www.mckinseyquarterly.com/How_US_health_care_reform_will_affect_employee_benefits_2813

For Urban Institute study:

http://www.urban.org/publications/901386.html

 

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