Will employers drop health insurance coverage because of the Affordable Care Act?

Abstract

Since the passage of the Affordable Care Act, there has been much speculation about how many employers will stop offering health insurance once the act's major coverage provisions take effect. Some observers predict little aggregate effect, but others believe that 2014 will mark the beginning of the end for our current system of employer-sponsored insurance. We use theoretical and empirical evidence to address the question, "How will employers' offerings of health insurance change under health reform?" First, we describe the economic reasons why employers offer insurance. Second, we recap the relevant provisions of health reform and use our economic framework to consider how they may affect employers' offerings. Third, we review the various predictions that have been made about those offerings under health reform. Finally, we offer some observations on interpreting early data from 2014.

Keywords: Employer-Based Insurance System; Health Economics; Health Reform.

Exhibit 1

Percent of Private Sector Workers Receiving Offers of Health Insurance, by Firm Size, 2000 and 2011 Source: Medical Expenditure Panel Survey, Insurance Component.

Exhibit 2

Percent of Private Sector Workers Receiving Offers of Health Insurance, by Firm Size and Majority Low-Wage Status, 2011 Source: Medical Expenditure Panel Survey, Insurance Component.