Employers could save billions by dropping workers from health plans, report shows

A look at an unforeseen consequence of health care law


A new survey of Fortune 100 companies finds that the health care overhaul, contrary to the claims of its authors, created some perverse incentives for employers to drop workers from company insurance plans. 

Republicans on the House Ways and Means Committee surveyed the top 100 companies about how much they spent on health care -- a total of 71, covering 5.9 million employees, responded. The results suggested it would be far more attractive for companies to drop workers from those plans than keep them. 

Even after paying a penalty of $2,000 per employee, the companies stand to save $28.6 billion in 2014 alone by shifting employees to health insurance exchanges governed by strict federal standards. The companies stand to save more than $422 billion over the first 10 years of the law by doing this. 

"The penalties for the employers who drop coverage are very low, and the subsidies for the workers in the exchanges are very high," said James Capretta, with the Ethics and Public Policy Center. 

If the companies indeed take this step, the move would fly in the face of pledges by the law's backers, including President Obama, that U.S. workers would not lose their employer-provided health plans. 

Shifting over to the insurance exchanges, while potentially a hassle for employees who had that decision mostly taken care of at their jobs, might not necessarily be a bad thing. 

The new exchanges would offer several choices of plans, and workers would get generous federal subsidies -- which only phase out at about $88,000 income. 

The exchanges could be attractive to both employers and workers. That is especially true of small employers. Many companies would not want to be the first to drop coverage, but if a competitor did, others might feel compelled to follow suit, causing a snowball effect. 

No one knows how many companies could drop insurance and shift workers to the exchanges. 

But the attraction is apparent -- they could pay the fine, save several thousand dollars per worker and offer to share part of that savings in higher wages. 

The higher cost of subsidies, though, would fall on the taxpayers. 

Yet some analysts argue large companies would be reluctant to drop coverage. 

"I think competition for labor is still intense and to recruit and retain a talented work force you've got to provide generous benefits," said Andrew Webber, president of the National Business Coalition on Health.

But Neil Trautwein, vice president of the National Retail Federation, said that "in a pure dollars and cents standpoint, it could not be more clear -- you save a lot of money, hundreds of millions of dollars for some of these companies, by no longer providing coverage." 

Jim Angle currently serves as chief national correspondent for Fox News Channel (FNC). He joined FNC in 1996 as a senior White House correspondent.