Is employer-sponsored health insurance on life support?

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(CBS/AP) Is employer-sponsored health insurance on life support?

A new survey shows that one out of every 10 midsized and large companies say they'll stop offering health insurance once federal insurance exchanges kick off in 2014, according to the survey, which was conducted by consulting firm Tower Watson.

That number may grow, since the survey found an additional 20 percent of the companies still don't know what they're going to do.

"With so much still unknown regarding both the short- and long-term impact of health care reform, most employers will not make wholesale changes to employer-sponsored health plans in 2012," Tower Watson's Ron Fontanetta, said in a written statement. "However, a small group of employers is driving more fundamental change in 2012."

Employer-sponsored health insurance has long been the staple of the U.S. health insurance system. But the survey suggests some employers feel they might be better off paying fines and taxes than continuing to provide benefits, which takes money away from their budgets.

The federal exchanges - devised under the health care overhaul - aim to provide a marketplace for people to buy government-subsidized insurance based on income levels.

Most employers expect to continue offering benefits once the exchanges start. But former insurance executive Bob Laszewski said he was surprised that as many as 8 or 9 percent of companies already expect to drop coverage a couple of years before the exchanges start.

"Dropping coverage is going to be very difficult for these (companies) to do," said Laszewski, a consultant who was not involved with the studies. Such a move, he said, comes with potential payroll-tax headaches and could subject firms to fines, while also cutting employee's compensation if companies refuse to up their salaries to account for the insurance cuts.

Towers Watson's Randall Abbott said the survey results can't be viewed as a final decision. There are still many unresolved variables, and companies may change their thinking once they learn more about the overhaul.

"2012 will ultimately be a defining year - the year some employers head down a path of bold and decisive actions, while others will wait and see," Randall said in the statement.

The health care overhaul also faces court challenges, and President Obama is up for re-election next year, two more variables that could shape what happens in 2014.

The Obama administration, however, took issue with the Towers Watson survey, pointing out studies by the nonpartisan Congressional Budget Office and nonprofits like Urban Institute that reached different conclusions.

An Urban Institute study projected overhaul will barely effect employer-sponsored insurance. When lawmakers debated the legislation, the CBO projected it would only have minimal impact on employer plans. About 3 million fewer people would be covered through work, but they'd be able to get insurance elsewhere.

Health and Human Services spokesman Richard Sorian said the administration expects to see a rise in employer-sponsored health insurance - not a decline.

"History has shown that reform motivates more businesses to offer insurance," said Sorian. "Health reform in Massachusetts uses a similar structure, and the number of people with employer-sponsored insurance in Massachusetts has increased."

But according to Dick Powers, a spokesman for the state health care agency Massachusetts Health Connector, the total is flat. He said the number of people with employer-sponsored coverage climbed after Massachusetts enacted reform in 2006 but have dropped back to pre-reform levels since the economy tanked in 2008.

The percentage of employers in the state that offer their workers health insurance has risen from 69 percent before reform to 77 percent.

Companies that  drop coverage likely will be those that have a low percentage of workers enrolled in their plans and high staff turnover, Abbott said. This could include retail or hospitality businesses - for those companies, benefits are not crucial to retaining workers, and their employees may find better options on the exchange.

"Health care is high-cost, fast-growing expense they would like to eliminate," Abbott said.

Last year, the average annual health insurance premium for employer-sponsored family coverage was $13,770 per worker, with companies picking up most of that tab, according to the Kaiser Family Foundation and Health Research and Educational Trust.

More than 50 million Americans are uninsured, including 7 million children.

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