Businesses planning to cut health benefits

President Barack Obama argued that his push for comprehensive health care legislation wasn’t a distraction from his economic agenda, but rather one of its key components. In March 2009, less than two months into his presidency, he noted that health care costs constituted “one of the greatest threats not just to the well-being of our families and the prosperity of our businesses, but to the very foundation of our economy.”

And he was correct. Unfortunately, the legislation he eventually signed, with its mountain of new regulations and taxes, is only adding to that burden.

A new study of 368 midsize to large companies by Towers Watson, an employee benefits consulting firm, showed that businesses are already scrambling to adjust. The study builds on a similar survey by the firm last year that found 90 percent of businesses expected the law to increase their health care costs.

In the survey released this week, 88 percent of businesses said they were taking steps to control costs in response to the law and to find a way to avoid the excise tax on high-value health care plans set to kick in by 2018.

During his September 2009 health care speech to a joint session of Congress, Obama declared that “the problem of rising costs” was “why so many employers — especially small businesses — are forcing their employees to pay more for insurance, or are dropping their coverage entirely.”

Yet the Towers Watson report found that many employers will do precisely that because of the health care law itself. According to the survey, nearly one in four employers is considering reducing their contributions to the benefits of employees’ spouses and children, nearly half are mulling “substantial reductions to health care benefit value for active employees,” and 54 percent of companies are already planning to drop coverage for retirees (both younger and older than 65).

The trickiest decision for businesses is whether they should continue to offer coverage at all, or simply pay a penalty and dump their employees into the new government-run, taxpayer-subsidized insurance exchanges.

According to the study, 70 percent of employers are “skeptical” that the exchanges will be a “viable alternative.” Yet as of now, nearly one in 10 say they’re already planning on dropping coverage, part of the 29 percent who are at least considering it.

Decisions may change, but the broader takeaway is that the law is already creating a cloud of uncertainty for businesses whose viability depends on years of advance planning. Instead of lifting a burden as Obama promised, his signature legislation is creating new ones.

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