Many companies are cutting jobs in response to rising health care costs spurred by the Affordable Care Act, according to a new survey by the Federal Reserve Bank of New York.
Roughly one-fifth of service sector and manufacturing company executives said they are reducing the number of workers in response to provisions in the healthcare law, according to the Empire State Manufacturing Survey and the Business Leaders Survey.
The New York fed surveyed about 100 executives in the manufacturing sector and roughly 150 executives in the services sector located in New York State, Northern New Jersey and Fairfield County, Connecticut earlier this month.
The results add to a bevy of bad news related to the Obama Administration’s signature health care law. Health insurers are requesting average premium increases of 24% this year, according to an independent analysis, while Aetna said it would withdraw from 11 of the 15 states where it offers plans through the Affordable Care Act exchanges.
One person familiar with the results said it is difficult to know whether the executives expect to cut jobs or hire fewer workers than planned.The percentage of companies predicting job cuts is similar to prior surveys on the Affordable Care Act conducted in 2015 and 2014, the person added.
Companies nationwide cite rising healthcare costs as one reason for increasing labor pressures on margins. Omaha, Neb.-based communications company West, for example, sold several call-center businesses last year, partly because of wage and health cost increases, said chief executive officer Tom Barker, in an August earnings call with analysts.
Charlotte, N.C.-based fast food chain Bojangles, cited increasing healthcare costs as a weight on first-quarter revenues. Meanwhile, Broomfield, Colo. restaurant chain Noodles& Co. also cited increased labor costs, partly due to rising healthcare, as one reason margins declined in its fiscal second-quarter. The companies didn’t respond to requests for comment.
According to the New York Fed’s survey, executives said they expected healthcare costs to rise a median 8.5% this year, and another 10% next year, according to the survey. They cited higher insurance premiums, higher prescription drug costs, and the ACA as factors.
Roughly 40% of respondents said they would keep their health plans unchanged, with a similar number saying they would react by making modifications. Those changes included increasing deductibles, demanding higher co-pays from employees, and raising the ceiling on out-of-pocket maximum payments.