A project of the George Washington University's Hirsh Health Law and Policy Program and the Robert Wood Johnson Foundation

EBRI report finds fewer Americans obtain coverage through employer

Posted on September 27, 2012 | No Comments

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According to a new Employee Benefit Research Institute (EBRI) report, the uninsured rate shrank for working-age Americans last year. The percentage of non-elderly Americans with coverage increased to 82 percent in 2011, up from 81.5 percent in 2010. Employment-based health insurance coverage rates dropped, however. Although employer-sponsored coverage remains the dominant source of health coverage in the United States, providing coverage for 155.5 million people under age 65 in 2011, the percentage of non-elderly individuals with employer-sponsored coverage has declined every year since 2000.

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According to a Q&A document recently released by the Internal Revenue Service (IRS), employers that do not offer health insurance but reimburse premiums for employees that purchase private insurance may be hit with a financial penalty. The Q&A states that employers utilizing this approach are effectively creating employer payment plans, which are beholden to the same rules and requirements as other group health plans under the Affordable Care Act (ACA). The IRS states that this arrangement does not comply with the ACA market reforms, and offering this option to employees may result in a $100/day excise tax per applicable employee for the employer.
In a blog post published by the US Department of Treasury, the administration announced they will delay the employer shared responsibility provision of the Affordable Care Act (ACA) until 2015. As a result, employers with more than 50 employees that do not offer health insurance will not be held responsible for the associated penalty, which is a fine of up to $3,000 per employee, excluding the first 30. Mark Mazur, Assistant Secretary for Tax Policy, cited the complexity of the reporting requirements for large employers as the reason for the delay. Giving employers an additional year to comply with the regulations will allow the administration to devise simpler reporting methods that are more consistent with the law, and it provides employers additional time to adapt health coverage and reporting systems. Mazur also noted that most large companies impacted by the shared responsibility provision of the ACA already offer health insurance to their employees.
As described in a previous Implementation Brief, the Health Insurance Portability and Accountability Act of 1996 (HIPAA) generally prohibits group health plans and group health insurance issuers operating in the group health market from discriminating against similarly situated individuals with regard to premiums, benefits or eligibility based on a health factor. HIPAA recognized an exception...
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.
The 2012 Towers Watson/National Business Group on Health Employer Survey on Purchasing Value in Health Care offers insights into the actions and plans of leading U.S. employers and views of what the future of employer-provided health care in the U.S. may look like this year and in the coming three years. According to the study, as health care costs continue to rise, employers are looking for ways to cut costs. While the total cost of health care is predicted to rise 5.3%, to $11,507 per employee in 2013, the growth is slowing. Many companies will keep premium increases in line with the health care cost increases. The study found that 13% of companies would increase premiums by 5% in 2013, for example.
The Government Accountability Office (GAO) released a report yesterday which reviews estimates of the impact of the Affordable Care Act (ACA) on employer-sponsored coverage. According to some researchers, the ACA's Medicaid expansion and subsidized coverage for low- and moderate-income people who buy health insurance through Exchanges beginning may discourage employers from offering coverage. However, other researchers believe that the financial penalties imposed by the ACA will actually encourage employers to offer coverage. The GAO report examines 27 studies published between January 1, 2009 and March 30, 2012 that offer estimates regarding changes in employer-sponsored health coverage as a result of the ACA.
In the 2012 Deloitte Survey of U.S. Employers: Opinion about the U.S. Health Care System and Plans for Employee Health Benefits, nine percent of companies, which represent three percent of the workforce, anticipate dropping health insurance coverage sometime within the next three years. The survey reported that 81 percent of companies, which represent 84 percent of the workforce, plan to continue offering employer-sponsored health insurance. Ten percent of companies, which represent 13 percent of the workforce, reported that they were unsure whether or not they would keep employee health benefits. According to the survey, many employers are considering sending their employees to participate in the Affordable Care Act's (ACA's) Exchanges. Small employers are the most likely to be interested in such an option. Deloitte's report collected the results of a web survey of 560 randomly selected employers with 50 or more employees. Participants included chief executive officers, chief financial officers, and chief human resources officers.
A new report published by Truven Health Analytics says that employers choosing to drop their group health insurance plans and pay the penalties under the Affordable Care Act (ACA) would experience no cost advantages. Furthermore, the report suggested that employers who do choose to suspend health benefits would incur sizable operational and productivity repercussions. These negative outcomes, the report concluded, would thus discourage most large employers from shifting employee health benefit strategies after ACA implementation. Truven reported three key findings. First, employers would experience no immediate or long-term cost advantage by eliminating group health benefits. Second, employers would experience higher costs in scenarios where employees are shifted into exchanges for health benefits. Employees would suffer a significant cut in total compensation in situations where employers eliminate group health benefits and thus force employees to assume benefit costs.
Employment-based health benefits are the most common form of health insurance in the United States. In 2010, 58.7 percent of non-elderly individuals were covered by employment-based health plans, with 68.6 percent of working adults covered. However, the percentage of the population with employment-based health benefits has recently been in decline due to the 2007-2009 recession. The percentage of individuals under age 65 with employment-based health benefits fell from 62.4 percent in 2008 to 58.7 percent in 2010, and the percentage of workers with coverage through their own employers fell from 54.2 percent in 2007 to 51.5 percent in 2010, its lowest level since 1994. The Employee Benefit Research Institute (EBRI) recently published an Issue Brief to examine the state of employment-based health benefits among workers with respect to offer rates, coverage rates, and take-up rates. It also examines how the state of employment-based health benefits has changed since the mid-1990s, reasons why workers do not have employment-based health benefits from their own employers, and how these reasons have changed since the 1990s. The estimates presented in this paper can also serve as a baseline against which to measure the impact of the Affordable Care Act of 2010 (ACA) on employment-based health benefits in the future.