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Employer-Sponsored Insurance and Health Reform: Doing the Math

NIHCR Research Brief No. 11
December 2012
Jean M. Abraham, Peter Graven, Roger Feldman

Almost 60 percent of Americans younger than 65 obtain health insurance through an employer, but the proportion is steadily declining, largely because of rising health care costs. The decline in employer coverage has disproportionately affected low-wage workers and those in small firms. Amid concerns that national health reform will hasten the ongoing decline of employer coverage, there have been widely differing estimates of how the law will affect employer decisions to offer coverage. A new national study by University of Minnesota researchers working with the Center for Studying Health System Change (HSC) calculates the economic incentives employers face to offer coverage to active workers before and after reform implementation. The findings indicate establishments employing the vast majority of workers (81%) currently offered insurance will continue to have an economic incentive to offer coverage. Under reform, employer premium contributions remain tax exempt, and two new policies take effect in 2014: a penalty on larger employers that do not offer affordable insurance and premium tax credits for lower-income people to purchase insurance in new state exchanges if they lack access to affordable employer coverage. The economic incentive to offer health benefits—expressed as a per-employee dollar amount—is calculated by combining the effects of the three policies.

Following reform implementation in 2014, workers in large firms, those with a union presence and those in higher-wage industries, such as professional and financial services, will see modest changes in their employers’ economic incentive to offer coverage. However, other workers will face large changes. Primarily because establishments with fewer than 50 full-time workers are exempt from any penalty, many will no longer have as strong an economic incentive to offer coverage. The same is true for low-wage firms because many of their workers will qualify for subsidized, exchange-based plans. However, only about a third of workers in low-wage, small firms with fewer than 50 workers currently are offered health benefits.

This article is available at the National Institute for Health Care Reform Web site by clicking here.





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The Center for Studying Health System Change Ceased operation on Dec. 31, 2013.