The Effects of the Affordable Care Act on Workers’ Health Insurance Coverage

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Christine Eibner, Ph.D., Peter S. Hussey, Ph.D., and Federico Girosi, Ph.D.

Employer-sponsored health insurance is the cornerstone of the U.S. health insurance system ... The Patient Protection and Affordable Care Act of 2010 (the ACA) builds on, rather than eliminates, employer-sponsored insurance.

...

The ACA builds on the employer-based health insurance system by developing exchanges through which small employers can offer coverage and by penalizing large employers that do not offer coverage. The exchanges, which will be open to both small employers and individuals, could alleviate some of the difficulties faced by small firms that want to offer insurance. Currently, small firms’ capacity to offer coverage is limited by high administrative costs, low bargaining power to negotiate benefit design and premiums, and a small number of enrollees for risk pooling. By aggregating employees of small firms into a single risk pool, exchanges will reduce year-to-year variance in premiums and may increase bargaining power and reduce administrative spending per enrollee. However, because the ACA also expands Medicaid eligibility and provides subsidies for low-income individuals without employer coverage, some have raised concerns that the new law may cause employers to stop offering health insurance. Workers’ preferences regarding insurance coverage will also change with the introduction of new options for subsidized coverage through the exchanges and financial penalties for being uninsured.

Our team at the RAND Corporation has simulated the effects of the ACA to predict how and why health insurance markets are likely to change after implementation. RAND’s Comprehensive Assessment of Reform Efforts (COMPARE) microsimulation model predicts individuals’ decisions about health insurance enrollment by comparing the benefits of an option (e.g., reduced out-of-pocket expenditures, lower risk, increased consumption of medical services) with the costs (e.g., higher premiums). In this model, firms decide whether to offer insurance and what type to offer on the basis of a “group choice” algorithm, whereby they consider their workers’ preferences and the costs of providing coverage. The decision-making process followed by an employer accounts for the possibility that some workers may be eligible for Medicaid, subsidized coverage through the exchanges, or inclusion in a spouse’s insurance policy. These factors reduce the firm’s incentive to offer insurance. The model also accounts for penalties that may be levied on firms with 50 or more workers that do not offer coverage and for the fact that firms with 100 or fewer workers now have the option of offering coverage through the exchanges.

We modeled an ACA-based scenario that includes the individual mandate, penalties for firms with more than 50 workers that do not offer coverage, a Medicaid expansion to include persons with incomes as high as 133% of the federal poverty level, and the creation of state health insurance exchanges open to individuals and firms with 100 or fewer workers. Individuals who obtain coverage through the exchanges are eligible for government subsidies if their incomes are between 100 and 400% of the federal poverty level and they do not have a qualifying offer of insurance through an employer.

Although the model allows employers to drop coverage in response to the reform, we estimate that the law will result in a large net increase in employer-sponsored insurance offers. We predict that the number of workers offered coverage will increase from 115.1 million (84.6% of the approximately 136.0 million U.S. workers) to 128.7 million (94.6%) after the reform. This increase is not driven by penalties levied on employers with more than 50 workers. In fact, the probability of being offered coverage increases proportionately more for workers at small firms than for workers at large firms, even though small firms are not subject to penalties. Currently, only 60.4% of workers at businesses with 50 or fewer employees have an offer of coverage; the proportion is projected to increase to 85.9% after the reform. The large increase in offers provided by small businesses is driven primarily by two factors: greater demand for coverage by workers due to individual penalties for being uninsured and the availability of new, often lower-cost insurance options (because of administrative savings, for example) for small businesses that offer coverage on the exchanges. After the reform, we predict that nearly three of four workers offered coverage by small businesses will receive that offer through the exchanges. The ACA will have a lesser effect on large employers, since most already offer insurance coverage to their workers. Of the 13.6 million workers newly offered coverage, only 3.2 million will be employed by firms large enough to be subject to employer penalties.

The exchanges will be run by the states, which will have latitude over many design options. State decisions will most likely have substantial effects on how many firms actually decide to offer coverage through the exchange. For example, states have the option to allow firms with more than 100 workers to offer coverage through the exchange, although this is not required. If large employers are allowed to participate in exchanges, we predict that many — both current and new insurance offerers — will elect to do so.

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Our prediction that employer-sponsored insurance will remain an important source of coverage is very robust to variations in modeling assumptions. This is partly driven by an increase in workers’ demand for health insurance. After the ACA is implemented, firms making decisions on the basis of costs and benefits of their insurance options, including new subsidies and penalties, will frequently choose to offer insurance rather than to drop coverage and allow their workers to buy individual coverage. This prediction is consistent with evidence from Massachusetts, where the rate of insurance offers by employers increased after the 2006 state health care reform. The tax-advantaged treatment of employer-sponsored coverage helps to sustain the employer-based system. However, the nature of employer-sponsored coverage may change substantially after implementation of the ACA, with an increase in the number of workers offered coverage through the health insurance exchanges. Many employers will find that offering coverage through the exchanges is an attractive option, owing to wider risk pooling, low administrative costs, and expanded choices.

http://healthpolicyandreform.nejm.org/?p=12339&query=home

[I AM NOT THAT GUY 5,715]

Our prediction that employer-sponsored insurance will remain an important source of coverage is very robust to variations in modeling assumptions.

http://healthpolicyandreform.nejm.org/?p=12339&query=home

So, we are still stuck with the employer based system? Where is all that change we were promised!

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So, we are still stuck with the employer based system? Where is all that change we were promised!

I know it's not single payer and yes, it doesn't quite achieve the Democratic Party ideal of universal coverage, but in what world is the following not a good thing?

Currently, only 60.4% of workers at businesses with 50 or fewer employees have an offer of coverage; the proportion is projected to increase to 85.9% after the reform.

[JohnSmith2007 353]

I know it's not single payer and yes, it doesn't quite achieve the Democratic Party ideal of universal coverage, but in what world is the following not a good thing?

Currently, only 60.4% of workers at businesses with 50 or fewer employees have an offer of coverage; the proportion is projected to increase to 85.9% after the reform.

It just means that more people will overpay for health coverage. My employer just raised my payments and increased my deductable and blamed the health care bill as the reason for it.

[DukeOfYork 28]

Employers will also start to pass the increase in premiums on to their employees rather than absorb them. If you think you pay too much for your portion of employer offered health care, you're going to start paying more in 2011.

[I AM NOT THAT GUY 5,715]

I know it's not single payer and yes, it doesn't quite achieve the Democratic Party ideal of universal coverage, but in what world is the following not a good thing?

Currently, only 60.4% of workers at businesses with 50 or fewer employees have an offer of coverage; the proportion is projected to increase to 85.9% after the reform.

It may happen anyways, as most employers will rather pay the fine, than provide coverage, so in the end, we will probably get something like medicare/medicaid for everybody.

[Gary and Alla 3,694]

I know it's not single payer and yes, it doesn't quite achieve the Democratic Party ideal of universal coverage, but in what world is the following not a good thing?

Currently, only 60.4% of workers at businesses with 50 or fewer employees have an offer of coverage; the proportion is projected to increase to 85.9% after the reform.

That would be this world. It is a "projection" of a government expectation. It will not come to pass, which is fine with the government because what they want is single payer control. They will use this system and say "see, it failed, we need MORE"

We have a similar system in Vermont, it has been here for some years. Employers must provide insurance OR pay into the state "Catamount Care" Employers have found it easier and MUCH cheaper to simply pay into Catamount Care and drop their coverage. The number of Vermonters covered by Catamount Care is some 4 times what they expected.

While last year we were trying to figure out how we would pay our bills in Vermont since or budget has gone from a surplus to a deficit since Catamount Care began, now we can just wait to be subsidized by the bigger states when Obama care kicks in.

Send your check to...

Governor Jim Douglas, Republican

Montpelier VT

Oh , never mind, we will just deduct it from your paycheck and save you the stamp.

[Kathryn41 3,205]

While this thread discusses health care it is still politicized via the discussion so I am moving it to the new Sub-forum

[luckytxn 2,263]

Just found out recently that premiums are going way up for family coverage so for the first time I would like to thank Obama the Socialist for allowing me to have something to honestly blame the wife for.

[Mr. Big Dog 10,747]

Employers will also start to pass the increase in premiums on to their employees rather than absorb them. If you think you pay too much for your portion of employer offered health care, you're going to start paying more in 2011. Just as you have in 2010, 2009, 2008, 2007, 2006, etc.

fixed.

[mawilson 2,133]

fixed.

In other words, no change?

[Mr. Big Dog 10,747]

In other words, no change?

Sadly, yes.

[evli1966 88]

That would be this world. It is a "projection" of a government expectation. It will not come to pass, which is fine with the government because what they want is single payer control. They will use this system and say "see, it failed, we need MORE"

Unless we get Obam and his league out of there.

Thi sis when they will force public care and diminish priviate ins further.

In other words, no change?

yes

except costs seem to be climbing faster now

[Mr. Big Dog 10,747]

except costs seem to be climbing faster now

Really? Can you substantiate this?

[evli1966 88]

Really? Can you substantiate this?

My premiums are targeted to increase 9-12% by next year my employer stated these would be passed on to us.

The deductible for our current ins is 250 single/500 family

new deducible is to be 300/600 possibly more

still a 90/10 plan with services being restricted such as what is covered in non preferred providers and dental services.

That is how it is affecting me at this time.

Not all of us belong to corrupt Unions which lobbied for these changes and in affect garnered the power to negotiate their benefts. At least they thought it was a smart move.

no mention of increase prescriptions or copays for visits.