Getting Insurance at Work
You might have seen reports about a study from McKinsey and Company claiming that a significant number of employers will stop offering insurance to their workers in 2014. Unfortunately, the study misses some key points and doesn’t provide the complete picture about how the Affordable Care Act will strengthen the health care system and make it easier for employers to offer high quality coverage to their employees. Here are the facts:
The McKinsey Study is an Outlier
Respected independent organizations have examined whether employers will continue to offer coverage. Here’s what they found:
The Rand Corporation: "The percentage of employees offered insurance will not change substantially, but a small number of employees in small firms (defined as those with under 100 employees in 2016) will obtain employer-sponsored insurance through the state insurance exchanges."
The Urban Institute: "Some have argued that the Patient Protection and Affordable Care Act would erode employer-sponsored insurance (ESI) by providing incentives for employers to stop offering coverage. Others have claimed that most businesses would face increased costs as a result of reform. A new study finds that overall ESI coverage under the ACA would not differ significantly from what coverage would be without reform."
Mercer: "In a survey released today by consulting firm Mercer, employers were asked how likely they are to get out of the business of providing health care once state-run insurance exchanges become operational in 2014 and make it easier for individuals to buy coverage. For the great majority, the answer was 'not likely.'"
Employers Have No Incentive to Drop Coverage
Economists agree that employers offer health insurance to help attract and retain the most talented employees. Employers will continue to seek out top talent: and the new law makes it easier for them to do so by tackling health costs and supporting small businesses. Additionally, dropping coverage is unlikely to save money for employers. As Tracy Watts of Mercer said:
“Employers are reluctant to lose control over a key employee benefit. But beyond that, once you consider the penalty, the loss of tax savings and grossing up employee income so they can purchase comparable coverage through an exchange, for many employers dropping coverage may not equate to savings.”
At Odds With History
Health reform in Massachusetts uses a similar structure as the Affordable Care Act. It includes exchanges where people can purchase health insurance, a personal responsibility requirement to bring everyone into the health insurance system and an employer responsibility requirement. The result? Since reform was enacted in Massachusetts more than five years ago, the number of individuals with employer-sponsored insurance in Massachusetts has increased. And job growth in Massachusetts has kept pace with other New England State and the nation.
McKinsey says they obtained their data after they “educated respondents” about reform and that their survey used proprietary research. We don’t know what respondents were told or whether they had the chance to check with their colleagues or crunch the numbers for their business before responding.
The Bottom Line
A central goal of the Affordable Care Act is to reduce the cost of providing health insurance and make it easier for employers to offer coverage to their workers. We have implemented the law at every step of the way to minimize disruption and maximize affordability for businesses, workers, and families. And we agree with experts who project that employers will continue to offer high quality benefits to their workers under the new law. This one discordant study should be taken with a grain of salt.