Cost Of ACA To Large Employers Could Be Up To $5,900 Per Employee

When looking at increases in health care costs solely due to the Patient Protection and Affordable Care Act (ACA), the cost of the ACA to large employers (those with 10,000 or more employees) is estimated to be between $4,800 to $5,900 per employee, according to recent research from the American Health Policy Institute. The study, The Cost of the Affordable Care Act to Large Employers, contained responses from 100 large employers, and intended to isolate the ACA’s role in increasing health care costs—separate from the larger trends taking place in health care, such as the aging workforce or the rate of health care inflation. In addition, the study does not take into account possible off-setting savings generated by the ACA.

Direct and indirect costs. The American Health Policy Institute noted that the ACA is directly and indirectly increasing the cost of employer-provided health care. Some direct costs of the ACA to employers include: the Patient Centered Outcomes Research Institute fee; the temporary reinsurance fee; the excise tax on high-cost plans; the mandate to cover adult children up to age 26 as dependents; among others. Some indirect costs imposed on employers due to the ACA are: new supply-chain taxes passed onto employers, such as the medical device tax; increased take-up rates of employer-sponsored coverage due to the individual mandate; and increased cost-shifting from expanded Medicaid coverage.

Cost implications. The study found that the total cost of the ACA to all large employers over the next ten years is estimated to be between $151 billion to $186 billion, or $4,800 to $5,900 per employee, and between $163 million to $200 million per large employer. The ACA is estimated to increase the health care costs for large employers by 4.3 percent in 2016, 5.1 percent in 2018, and by 8.4 percent in 2023, with the increase primarily due to the high-cost excise tax that begins in 2018, noted the American Health Policy Institute.

Cost savings. While the study specifically did not adjust these estimates for potential off-setting savings due to the ACA, the ACA also might reduce employer costs by introducing a range of payment and delivery system changes designed to achieve a significant slowing of health care cost growth. A recent report from the Council of Economic Advisors found that the “ACA is contributing to the recent slow growth in health care prices and spending and is improving quality of care” by “reducing hospital readmission rates and increasing provider participation in payment models designed to promote high-quality, integrated care.”

For more information, visit http://www.americanhealthpolicy.org/content/documents/resources/2014_ACA_Cost_Study.pdf.

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