Survey shows small employers more likely to drop health insurance benefits Posted: November 11th, 2010

As medical costs balloon, some fear that businesses will find that it is cheaper to drop their employee health insurance coverage in 2014 and pay federal fines instead. However, a recent survey of employers by Mercer, a global consulting firm, finds that few are planning to eliminate medical coverage.

The federal Patient Protection and Affordable Care Act (PPACA) requires that, beginning in 2014, all employers with more than 50 full-time workers offer health insurance coverage as a benefit. For those who do not comply, penalties will be assessed. Workers who are self-employed, unemployed or who are not offered medical coverage through their employer may be eligible to purchase government-subsidized individual health plans.

Critics of health reform argue that PPACA provisions, such as extended dependent coverage and free preventive services, will continue the upward climb in insurance premiums. As a result, many businesses may find it cheaper to forgo employee health insurance and pay the penalties instead.

The Mercer survey asked 2,800 employers of all sizes whether dropping health insurance benefits might be an option. Of those surveyed, the following responded that they were likely to drop their employee health insurance in 2014:

• Businesses with more than 100,000 employees - 3 percent
• Businesses with more than 500 employees - 6 percent
• Businesses with less than 500 employees - 20 percent

According to Mercer, employers with high turnover and low-wage workers, such as many retail establishments, may be most likely to eliminate medical coverage.