When the US health care reform legislation comes into full force in 2014, about one third of employers will definitely or probably stop offering health insurance coverage to their workers, consulting company McKinsey wrote in a study involving over 1,300 companies from various industries and sizes.

The report authors believe that move the away from employer-provided health insurance will be considerably greater than politicians had envisaged. They predict a massive restructuring of health benefits sponsored by employers.

More than half of all companies that are very well informed about the health reform law are expected to do away with health coverage for their employees, the report explained.

These figures contrast with a Congressional Budget Office estimate of approximately 7% of current employees who have employer-sponsored health plans needing to switch over to subsidized-exchange policies.

Even if employers compensated the employees who lost their health coverage with more pay or some other benefits, companies will find that they would still be better off financially, the report revealed.

Although employers fear their workers will leave if they lose their employer-sponsored health coverage benefits, MicKinsey believes they will still stay. According to this new study, over 85% would stay.

In this rapidly changing environment, the authors stress, companies have to rapidly evaluate the implications of health care reform on their benefit and workforce strategies. They have to accurately estimate what risks and opportunities are brought about by reform.

The authors wrote:

“US health care reform sets in motion the largest change in employer-provided health benefits in the post-World War II era.”

Some industries are constrained by collective-bargaining agreements and other factors. However, the majority will seek out value-creating options between two extremes – making no alterations to the current health coverage offerings and dropping them completely.

Increasing the number of part-time workers – rather than completely dropping ESI (employer-sponsored insurance), companies may choose to cover just part of their labor-force, without violating the reform which does not allow them to discriminate according to employee income. They could take on more part-time workers – these people do not have to have health insurance coverage.

“How US health care reform will affect employee benefits “
Shubham Singhal, Jeris Stueland, and Drew Ungerman
McKinsey Quarterly

Written by Christian Nordqvist