A new investor report predicts that Standard & Poor's 500 companies could shift 90 percent of their workforce from job-based health coverage to individual insurance sold on the nation's marketplaces by 2020.
If all U.S. companies with 50 or more employees followed suit, they could collectively save $3.25 trillion through 2025, according to the report by S&P Capital IQ, a division of McGraw Hill Financial.
Standard & Poor's 500 companies could save $689 billion over the same period if they did likewise, the report found. Savings for S&P 500 companies could top $800 billion if health care inflation remains at the traditional 7.5 percent rate over the next decade, the report estimates.
If realized, the larger move to marketplace coverage would shift more of the cost and responsibility for employee health insurance to workers themselves.
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"Once a few notable companies start to depart form their traditional approach to health care benefits, it's likely that a substantial number of firms could quickly follow suit," the report noted. "The result would be a dramatic departure from the legacy employer/employee payroll deduction benefit provision relationship, and could quickly be the modern day equivalent of companies moving from defined benefit pension plans to defined contribution programs."
The S&P 500 is a stock market index of 500 large companies with common stock traded on the New York Stock Exchange or NASDAQ. It's considered a bellwether for the larger U.S. economy.
S&P 500 companies employ roughly 138 million people. That's about 20 percent of the U.S. workforce for companies with more than 50 workers.
The transition to marketplace coverage won’t take long, the report predicts. Ten percent of S&P 500 workers will shift coverage by 2016, 30 percent by 2017, 70 percent by 2019 and 90 percent by 2020.
Low- and middle-income workers, who already get a sizable federal subsidy to help them purchase marketplace coverage, are the most likely to be steered into the exchanges. But higher-income employees "will eventually be pushed towards the (marketplaces) and will be provided a stipend to help cover costs," the report predicts.
"Over time, these stipends will not likely keep pace with health care inflation, potentially providing companies with a savings compared to the amount of contributions that would have been made under an employer-sponsored plan."
The report predicts those stipends will eventually morph into employee pay, "completing the corporate departure from providing health care benefits."
Shifting workers to marketplace coverage could increase corporate profitability and make job-based coverage more of recruitment tool “as opposed to an expected or assumed benefit of employment,” the report noted. Employers could also move retiree health benefits to the marketplaces over time.
Broader employee participation in the markeptplaces could make coverage more affordable and competitive, the report added. It would also allow workers to keep their coverage and caregivers when changing jobs.
“However, the improvements may come at a cost, as individuals could largely be extricated from employer-based plans and contributions. Also, premium costs will rise for some individuals if they do not qualify for government subsidies,” the report said.
The projections are not etched in stone. Individual companies will decide when and how any such coverage transitions will be made. The projections could also change over time as the Affordable Care Act is amended and modified.
“Whether the current version of the ACA remains intact or is amended,” the report said, “the burden of acquiring or providing health benefits is sure to shift more from the employer toward the individual or employee, with varying degrees of support from the government, as time passes.”