Employers still offer health coverage, despite predictions of doom

U.S. workers continue to receive health insurance through their employers, even with the implementation of the Patient Protection and Affordable Care Act (ACA), according to an Urban Institute report.

Before the changes introduced under the ACA, there had been an ongoing decline in employer-sponsored insurance (ESI) coverage. The report noted that between 2000 and 2012, ESI coverage rates for non-elderly workers (ages 18 to 64) fell 11 percent, from 76.9 percent to 69.4 percent. Among workers in firms with fewer than 50 employees, coverage rates fell 17 percent, from 61.1 percent to 52.4 percent.

Thus, there were concerns that the ACA would accelerate this trend of declining ESI coverage as the greater availability of coverage outside of work would make it easier for employers to stop offering coverage. The subsidies provided by the ACA, along with the availability of Medicaid in states that chose expansion, were projected to cause employers to reconsider coverage and employees to take up the external offers. Instead, ESI offer, take-up rates, and coverage remained unchanged among nonelderly workers from June 2013 through March 2015.

Stability. The report noted several reasons why ESI remained stable under the ACA. First, workers received substantial benefits through the tax system from obtaining coverage through employers. Employers, thus, had a strong financial incentive to offer coverage, though these incentives were greater for workers with higher incomes because of higher marginal tax rates. With the exception of the “Cadillac tax,” which doesn’t go into effect until 2018, nothing in the ACA changed the tax treatment of ESI. As a result, employers still had strong financial incentives to offer coverage.

Offer rates for ESI coverage stayed roughly constant at around 83 percent for all workers, 62 percent for workers in small companies, and 95 percent for workers in large companies. The researchers found that the stability held whether workers were above or below 250 percent of the federal poverty level (FPL).

The ESI take-up rates also remained the same among workers with an ESI offer, 87 percent for all workers, 82 percent for workers in small firms, and 89 percent for workers in large firms.

In addition, ESI coverage rates remained unchanged at 60 percent for all nonelderly adults, almost 34 percent for nonelderly adults above 250 percent of FPL, and almost 84 percent for nonelderly adults above 250 percent of FPL.

Conclusions. The researchers found no evidence that ESI offer, take-up, and coverage rates fell from June 2013 to March 2015 overall for workers below 250 percent of FPL or for workers in in small firms. This was attributed to the effects of the individual mandate as well as strong tax incentives to obtain coverage from employers (employees were better off financially in accepting employer coverage). It was projected that the stability of ESI would continue even once the large firm employer mandate is implemented, as large firm employers are offering ESI coverage at over a 90 percent rate.

For more information, visit http://hrms.urban.org/briefs/Employer-Sponsored-Insurance-Continues-to-Remain-Stable-under-the-ACA.pdf.

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