Reform might not deal huge blow to employer-based insurance

The law's opponents say requiring employers to offer a minimum level of coverage would greatly increase costs, but a new study rejects that assertion.

By David Glendinning — Posted Feb. 2, 2011

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The health coverage offered to workers by their employers isn't likely to see a significant erosion from the implementation of health system reform, according to a study released Jan. 25 by the Robert Wood Johnson Foundation.

Business advocates that oppose the health reform law say the requirement for employers to offer a minimum level of health coverage to their workers starting in 2014 will cause significant increases in employer health costs, prompting many businesses to drop coverage altogether. But the report, conducted for the foundation by the Urban Institute, rejects these predictions.

By simulating health reform as fully implemented in 2010 and comparing the results to actual 2010 baseline figures, the researchers found that total employer spending on health coverage for workers would have decreased by an average of 0.6%.

Medium-sized firms would have paid an average of 11.8% more, either through new coverage to employees or federal penalties for not offering insurance, possibly restricting wages for workers at those firms. But the effect would have been canceled out largely by small-firm spending, which would have dropped by an estimated 8.7% due to discounted coverage offered through new health insurance exchanges. Large-firm spending would have remained largely unaffected, the study concludes.

"Our findings contrast with the predictions of some who argue that the [health reform law] will substantially disrupt or reduce employer-sponsored insurance," the study authors say.

Employers already are dialing back coverage due to cost increases. Even without health reform, the researchers say, premium growth will reduce employer-sponsored insurance coverage by an estimated 7.6 percentage points over 10 years. Reform provisions "could moderate this long-term trend," they say.

Employers say the reform law will accelerate the trend by making health coverage even more expensive for companies. But the Urban Institute study says this assertion ignores the potential cost savings to the system expected under reform. Researchers also note that companies dropping their health coverage altogether will need to boost wages or other compensation to remain competitive, allowing many of those workers to obtain affordable health coverage elsewhere.

The study is available online (link).

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