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United States
New York City, 21 October 2008

Most working Americans obtain health coverage through their employers – and neither presidential candidate is proposing to change that, although each of their plans, if enacted, would affect employers substantially. But over a third of US employers (almost exclusively small employers, with fewer than 500 workers) do not sponsor an employee health plan and one of the central questions of the reform debate is how they might be induced to do so. According to a major new employer survey on health care reform released today by Mercer, the majority of these employers believe that, at its current price, employee medical coverage is far beyond their means.

The survey was completed by 545 employers that do not offer employee health coverage, and nearly 2,900 employers that do. The survey used a probability sample and the error range is +/-3 percent.

Local media please note: Some state-level results are available upon request and will be of particular interest where health care reform has been enacted or is being considered (California, Massachusetts, Illinois, New York, New Jersey and Pennsylvania) and in election battleground states (Colorado, Minnesota, Ohio, Virginia and Wisconsin).

When asked their primary reason for not offering health coverage, 43 percent of all employers without employee plans answered “I can’t afford it” (Figure 2). Other reasons included employees being covered under other plans (20 percent), high workforce turnover (9 percent) and the perception that employees would rather have more pay than health coverage (9 percent). These employers were asked, if they were to offer a health plan, how much they would be willing to contribute per employee per month. For 59 percent, that amount ranges from zero to no more than $50. Only 10 percent said they would pay at least $200 (Figure 3). To put these results in context, Massachusetts’ “play or pay” law requires employers who don’t meet the “play” standard to pay $295 per employee per year to the state, and indications are that this amount may soon be adjusted upwards.

“This finding highlights how tough it’s going to be to ask very small employers to voluntarily take on the expense of providing health coverage,” said Linda Havlin, a Mercer worldwide partner. “It also helps explain why even relatively low-cost catastrophic plans like HSAs have not made great inroads with small employers that find it financially challenging to offer coverage.”

About half of these employers say it is very unlikely that they will offer a plan in the next three years (49 percent) and only about a fourth say it is even somewhat likely. Ms. Havlin added, “While most employers are committed to helping employees and their families be healthy, productive and financially secure, the results show that cost is simply too big a concern for many small employers.” (See Figure 4.)

Employers oppose ending or capping the tax exclusion

Employer health plan sponsors were asked to give their opinions on eight health care reforms that have been proposed by the presidential candidates, members of Congress or state governments. With employers more inclined to disapprove than approve of any of the reforms, the results demonstrate the difficulties of trying to achieve consensus around health care system changes.

One of the most hotly debated reform proposals to emerge during the presidential campaign is Senator John McCain’s plan to end or cap the tax exclusion for employer-sponsored health benefits. Forty-one percent of employers oppose such a plan, while just 30 percent are supportive (Figure 5). The larger the employer, the more likely it is to disapprove (57 percent of those with 20,000 or more employees disapprove).

Half of all employers oppose ”play or pay” laws, which would require employers to either offer health coverage or pay into a government fund to cover the uninsured (just 31 percent are supportive and 19 percent neither approve nor disapprove). Wholesalers/retailers (68 percent) and manufacturers (56 percent) are most likely to disapprove of a “play or pay” requirement.

Employers want to see everyone covered, but (emphatically!) not through a single-payer system

Only two of the reform ideas have the support of the majority or near-majority of employers. Just over half (53 percent) support requiring individuals to have health coverage if they can afford it, either through their employer or purchased on their own.

While neither presidential candidate’s platform includes such an individual-mandate proposal, Senator Barack Obama’s comes closest, requiring that all children have coverage. Another, more radical approach to achieving universal coverage – a health care system like Canada’s, where the federal government is the sole payer for health care services – was rejected (51 percent of all employers, and 63 percent of very large employers, disapprove).

Nearly half employers (46 percent) support having the federal government provide stop-loss protection to cover an employer’s catastrophic expenses.

Weighing in on state reform efforts

The survey identified employers with workers in Massachusetts, San Francisco and Vermont, which have enacted broad-based health care reforms requiring employer compliance, and asked them what actions they had to take to comply and how burdensome these actions were (Figures 6 and 7). Of the 384 employers with workers in Massachusetts, where reforms are the most complex, 79 percent have been required to take some action: collecting information to meet new reporting requirements (72 percent); establishing a new Section 125 plan (41 percent); modifying an existing plan (12 percent); or establishing a new ERISA plan (10 percent). Interestingly, only 4 percent reported that these efforts required “considerable” resources; most reported that they required “minimal or no resources” (58 percent) or “some resources, but [not enough to affect] other priorities” (38 percent).

And yet most employers are concerned about the potential impact of state or local health reform initiatives. Almost nine out of ten large employers (86 percent) said they were concerned or very concerned about the impact on cost; 71 percent are concerned about losing the flexibility to design programs to meet organizational needs, and 64 percent are concerned about losing ERISA protections (Figure 8).

Notes for editors

The figures referenced can be found in the attached PDF.

The data referenced in this release were collected as part of Mercer’s larger National Survey of Employer-Sponsored Health Plans, which will be released in late November.

Some state-level results are available upon request; these results will be of particular interest where health care reform has been enacted or is being considered (California, Massachusetts, Illinois, New York, New Jersey and Pennsylvania) and in election battleground states (Colorado, Minnesota, Ohio, Virginia and Wisconsin).

About Mercer

Mercer is a leading global provider of consulting, outsourcing and investment services. Mercer works with clients to solve their most complex benefit and human capital issues, designing and helping manage health, retirement and other benefits. It is a leader in benefit outsourcing. Mercer’s investment services include investment consulting and multi-manager investment management. Mercer’s 18,000 employees are based in more than 40 countries. The company is a wholly owned subsidiary of Marsh & McLennan Companies, Inc., which lists its stock (ticker symbol: MMC) on the New York, Chicago and London stock exchanges.

For more information, visit www.mercer.com.

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