July 20--When the health insurance exchange option arrives in 18 months, as required by the federal health care overhaul, some southwestern Pennsylvania employers might see it as an opportunity to drop their health care benefits.

After all, wouldn't life be simpler to just pay the fine mandated by the Affordable Care Act and let employees find health insurance through the exchange?

Simpler, yes.

Cheaper? Probably not -- and the cost may not come down to just dollars and cents.

A report by the Ann Arbor, Mich.-based firm Truven Health Analytics examined different approaches employers might take -- continuing an employee health benefit plan; dropping a plan and paying a fine under the health care law's "play or pay" provision; or dropping a plan while compensating employees for at least some of the cost of getting coverage through an exchange.

"Across the board," Truven analysts concluded, "there is no short-term or long-term advantage to employers dropping group health plans in favor of carrying fines."

That may dishearten employers who were thinking the Patient Protection and Affordable Care Act's health insurance exchanges were their ticket out of the expense and bother of administering a group health plan.

"I think there are a lot of people who say, 'If this is a viable option, we would love to get out of the health care business,'" said Jason Seltzer, president of Seltzer and Associates insurance brokers in Mt. Lebanon.

"I think there is a feeling among some small and mid-size businesses that the exchanges are a better way to go," added Lorin Lacy, principal for the health and productivity group at Buck Consultants.

The Truven analysis found otherwise.

"We couldn't find a win-win situation for both the employer and the employee," said Ray Fabius, chief medical officer for Truven. "In the end, the total cost of coverage goes up, and we believe it is considerable."

Many questions still surround the health exchanges, which are scheduled to go online in 2014, including what they will cover and how much they will cost. Many businesses are still sorting out their best strategy.

"Even the well-informed employer doesn't fully grasp the enormity of the decision because there are so many variables out there," said Mr. Seltzer.

But companies make decisions about benefits packages months or even a year ahead of time, so they don't have much time to decide now that the Supreme Court has ruled the Affordable Care Act constitutional. Enrollment in the exchanges is scheduled to start in July 2013.

M. Christine Whipple, executive director of the Pittsburgh Business Group on Health, said the many variables involved likely mean the employers are "going to a mixed strategy, looking at their population, their demographics and their coverage levels, and really analyzing what's going to be the best way to assure that employees are getting health benefits."

For businesses looking to escape yearly premium increases, taking the extreme option of dropping an employee health plan might be tempting. That could save a company tens of thousands of dollars, even adjusting for the $2,000 fine per employee per year it would pay under the Affordable Care Act, with the first 30 employees exempted.

As a result, though, Dr. Fabius said employees would absorb the $12,000 or so cost of getting coverage through an exchange -- hardly a move that would boost employee morale.

Local experts say that option seems unlikely.

"All of our clients look at employee health benefits as a necessary component for recruiting and retaining talent. Everyone recognizes the need to do this," said Mr. Lacy.

The middle-ground approach -- compensating employees for some or all of their costs for buying coverage through an exchange -- still means the employer "may face significant employer net cost increases," the Truven analysis showed, in part because a company would still have to pay the penalty.

In fact, only a small percentage of firms will see dropping coverage as a realistic option: The mandate does not require businesses with fewer than 50 full-time employees to offer a health plan.

Many firms with 500 or more employees self-insure and would not consider the exchanges attractive. With self-insurance, companies pay only for covered claims, while contracting with an insurer for catastrophic coverage and administering the overall plan.

"There is considerable savings when an employer does that," Dr. Fabius said, savings that would not be offset by steering employees to a health exchange.

He and others also point out that companies have realized the best way to keep health care costs down is to encourage a healthier lifestyle for their employees through exercise, improved diet and smoking cessation programs. "Every dollar spent on health care costs $2 to $3 in productivity," Dr. Fabius said.

Mr. Lacy agreed. "Employers want people to be healthy, to be focused on their health and focused on their careers."

Steve Twedt: stwedt@post-gazette.com or 412-263-1963.

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