According to a new study
for the National Institute for Health Care Reform (NIHCR), offering employer-sponsored health insurance will continue to make fiscal sense for businesses employing most workers (81%) now offered insurance. The study found that the economic incentives to offer coverage will remain strong under the Affordable Care Act (ACA) for most larger, higher-wage firms, but will weaken for small and low-wage employers. These smaller firms are the companies already more likely to drop coverage to due rising costs.
Pre-ACA, all businesses had the option to offer health insurance coverage. After 2014, employer premium contributions remain tax exempt, and two new policies will take effect. First, larger employers that do not offer affordable health insurance will be penalized and second, premium tax credits for lower-income people to purchase insurance in new state exchanges if they lack access to affordable employer coverage will be available.
The economic incentive to cover employees is calculated by adding the dollar value of the employer-sponsored insurance tax subsidy and the value of avoiding the penalty for not offering insurance, and then subtracting the value of the premium tax credits that eligible workers could use in an exchange if their employer does not offer coverage. After 2014, the largest firms (500 or more workers) will continue to have a strong economic incentive, with an average incentive of $2,503 per employee. However, the smallest firms (fewer than 50 workers) will face lower economic incentives because they are exempt from the penalty. Certain industries, such as food service, entertainment, agriculture, forestry and fishing, will have less incentive to offer employer coverage, as their workers will be eligible for exchange subsidies.
The study draws on data from the 2008-2010 Medical Expenditure Panel Survey.