Most employers could shift healthcare coverage to exchanges by 2020, report says

A new report is gaining attention for its prediction that U.S. companies could save trillions of dollars over the next decade by using the Affordable Care Act's (ACA) healthcare exchanges, and eliminating employee health plans.

The report, prepared for the financial services industry by S&P Capital IQ Global Markets Intelligence, predicts that companies could shift 90% of their workers from employer-based healthcare to individual coverage on insurance marketplaces by 2020. If all U.S. companies with 50 or more employees transferred coverage for their employees to the marketplace, they could save $3.25 trillion by 2025, the report predicts. If only Standard & Poor’s (S&P) 500 companies did so, they would save between $690 billion and $800 billion over the same period.

The premise of the ACA is to shift the responsibility for healthcare insurance to employees. This will put corporate America in a position to redefine its role in healthcare, the report states.

S&P 500 companies employ about 138 million people, or 20% of the American workforce. So when S&P companies adopt a practice, it often indicates the start of a new, large-scale trend among employers.

The report predicts that when the switch from employer to individual insurance begins, it won’t take long to complete, with 10% of S&P companies expected to begin transferring coverage to workers by 2016, 30% by 2017, 70% by 2019 and 90% by 2020. Low- and middle-income employees, entry-level workers or new college graduates, and part-time employees will be pushed into individual coverage first and will receive federal subsidies to help afford their new plans. Higher-income workers will follow later, likely with stipends to help cover the cost of their coverage, the report predicts. Those stipends will eventually become part of employee pay, completing the transition to a complete corporate abandonment of providing healthcare coverage.

But with all that money saved, someone is going to have to pay more, whether it is employees or the government. According to the report, employees moved to the exchange would pay nearly $2,800 more for their health benefits in 2016 compared with what they paid under an employer-provided insurance plan, or an increase of about 50%. But many low-wage, and even some middle-wage, employees will be eligible for a government subsidy to offset the cost of their their premiums which will also increase the financial burden of subsidizing healthcare for the federal government, the report predicts.

On the other hand, the more individuals that purchase healthcare coverage through the exchanges, the more affordable and competitive the market will become, the report explains. Purchasing individual coverage also will reduce the stress caused by changing jobs, because coverage won’t change with the employment. Overall, the shift could give employees more control over their healthcare coverage and more stability, but could also result in higher premiums for anyone not eligible for federal subsidies or offered stipends from their employers.

The report predicts that employee costs for healthcare will more than double by 2025, although they will be paying the same percentage-about 26%-of their premiums over that period. Employers’ share of premiums will drop from roughly 70% to 33%, while the government’s share is predicted to jump from less than 4% to about 41%.