Will 2014 Bring the Decline of Employer-Sponsored Health Insurance? Not likely.

One major question surrounding the implementation of ObamaCare is how it will affect the employer-sponsored health coverage. If employers change their current benefit offerings, this impacts both insurers and providers, but also potentially millions of Americans. Hence, both trade and popular press have been exploring the topic in headline after headline.

A previous post on this blog explored the impact of the very real possibility a majority of employers will shift to high-deductible health plans. These, of course, shift more financial responsibility for healthcare services on the individual employee and will mean big changes for healthcare providers, who will be responsible for collecting on these services rendered.

However, what if employers stop providing coverage altogether?

In Health Affairs' September issue, an article by University of Michigan researchers analyzed several studies that have explored this question. Questionably, the studies have arrived at various findings. However, after reviewing the various studies and their methodologies, the researchers conclude:

"Microsimulation models built on sound economic principles have for the most part predicted relatively small declines in employer-sponsored coverage as a result of health reform, and we believe these predications are likely to be correct."

According to the researchers' analysis, while there are many factors that will influence employers' decisions, provisions of the reform law that directly impact employers (i.e., penalties for large insurers not offering coverage and small business tax credits) increase the likelihood they'll offer insurance. Additionally, the individual mandate will increase demand by most employees (all but low-income workers who would benefit from the tax subsidy) for employer-sponsored coverage. 


While the origins of our current employer-sponsored system haven't led to market efficiency, to say the least, it seems that this system is unlikely to change drastically anytime soon. Efficiency should improve due to other market reform and employers' transition toward consumer-driven plans, but it could be slow.

I'll close with a bit of interesting history about the birth of employer-sponsored health coverage in the U.S. In a Wall Street Journal Economix blog post, Princeton economist Uwe Reinhardt explains:

"Our employment-based system was not the product of a carefully designed health policy. It was a byproduct of evading wage controls during World War II.

At the time it was thought that, as the nation's drafted military personnel risked their limbs and life on foreign battlefields at low, tightly controlled pay, those who stayed behind should have their wages controlled as well.

But with the wink of the eye with which Congress routinely puts loopholes into the tax laws or regulations it imposes, the wage controls imposed in World War II did not extend to fringe benefits. And thus, employer-paid fringe benefits, including employment-based health insurance, were born."

 

 

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