Employers Pessimistic About Benefit Costs Under PPACA – How Will This Impact Our Industry?

A new LIMRA survey of U.S. employers found more than half of employers have increased or plan to increase deductibles, co-pays or the contributions from employees to cover the cost of coverage for their medical plans. This follows a 15-year trend of health care cost-shifting by employers to their employees. According to a Kaiser/HRET survey, premiums for families have nearly tripled since 1999 – from $5,791 to $15,745 in 2012. Simultaneously, Department of Labor statistics show that employees’ wages have been stagnant over the past 10 years.

As the Patient Protection and Affordable Care Act (PPACA) is implemented, LIMRA wanted to get a sense of how employers thought it would affect their businesses and how they might react. The study discovered that the majority of U.S. employers (52 percent) felt that the health care reform law would negatively impact their businesses and only 1 in 10 employers felt their employees understood what the full impact of the health care reform would have on their businesses. Furthermore, almost a third of employers felt the health care reform law would negatively influence their employees’ ability to afford health care over the next 3-5 years.

In addition, at least a quarter of U.S. employers are considering eliminating non-medical benefits —including 25 percent of those employers offering life insurance — no doubt as a way to defray the increasing costs of medical care (chart).

In 2010, LIMRA found life insurance ownership at an all-time low and for the first time, more Americans were relying on employer-sponsored life insurance coverage than individual coverage. What will happen if a quarter of employers drop life insurance as part of the benefits they offer employees? With many Americans living paycheck to paycheck, the impact of losing a primary wage earner without having life insurance could be devastating to many families.

While these findings reflect the perception of employers based on their experience with benefits, there is an opportunity for producers and carriers to overcome this bias. LIMRA believes producers and carriers can educate employers, helping them understand the value of these benefits and the need for taking a strategic and long-term approach to their benefits. It is important for employers to be reminded that many of these products — like life insurance and disability insurance — help to protect a family from financial hardship in the face of loss or disability of the wage earner.