The Affordable Care Act – An Employer Conundrum

Why do employers provide health insurance? After all, it is one of the most expensive line items in their budget. Typically most employers cover 70 to 80% of their employees’ health cost. At $15,000 to $20,000 per year of cost per employee this is an important and often difficult decision for employers to make.  Many employers provide this benefit simply because it is the right thing to do.  I suspect most, however, provide it because they would simply not be able to recruit sufficient talent without it.  The American public for the most part has come to expect health coverage as a prerequisite for a decent job.  As the Affordable Care Act rolls out employers will be faced with a difficult choice.  Under the employer mandate do they continue to provide this expensive benefit or do they pay a fine?  If the concern is strictly economic the decision is easy.  Employers would pay the fine and send their employees to the state exchange to select a health policy on their own.  The decision however, is not one of pure economics.  At least two considerations are important.

First, what are my competitors doing, and how will my decision to eliminate health coverage impact my ability to hire and maintain competent employees?  Second, if I take away this benefit what will I have to replace it with in order for my employees not to feel cheated.  If this comes in the form of additional compensation, how long will it be before my employees forget the additional pay was in lieu of health benefits?

Even though the federal government has delayed the implementation of the employer mandate, nevertheless employers should use this time for thoughtful discussions and study around the decision of how they address this mandate.  Simple economics would dictate one alternative: employee morale and competitive pressure could force an entirely different decision.  Employers should use the time in 2014 preparing to make a thoughtful and well documented decision.

Stan Hupfeld, former award winning hospital CEO and author of “Political Malpractice” travels the country dissecting the ACA & exposes the fallacies & prejudices of both political parties explaining that, if we are willing to make hard choices, we can indeed cover the uninsured, control costs, & not bankrupt the country.