A new survey of 2,800 businesses conducted by Mercer finds that employers are “not likely” to stop providing health insurance coverage “once state-run insurance exchanges become operational in 2014,” undermining the often repeated prediction that “firms will find it more attractive to stop offering insurance and let employees get coverage in the new marketplace where generous subsidies will be available. From the report:
– 6% of all large employers with 500 or more employees say they are likely to terminate their health plans and have employees seek coverage elsewhere.
– 20% of small employers (those with 10–499 employees) say they are likely to terminate their health plans, especially those with low-paid workers and high turnover, like retailers.
While small employers are more likely to drop coverage than larger companies — companies that are too small to spread the risk and cost of coverage across a large pool of beneficiaries are often vulnerable to premium increases if just one employee falls gravely ill — Tracy Watts, a Partner in Mercer’s Washington, DC, office suggests that for most large companies offering insurance is a way to maintain control over what they spend on health care. “Employers are reluctant to lose control over a key employee benefit,” she said. “But beyond that, once you consider the penalty, the loss of tax savings and grossing up employee income so they can purchase comparable coverage through an exchange, for many employers dropping coverage may not equate to savings.”
After the first 10 years, the Congressional Budget Office estimates that “the number of people obtaining coverage through their employer would be about 3 million lower in 2019 under the legislation.” Actuaries at CMS estimated that just 1.4 million would move out of employer coverage.
Large employers also wouldn’t have access to the exchanges until 2017. And even then, it will be up to the states to allow large employers into the new marketplace. Of course, the gradual shift from ESI (employer sponsored insurance) to regulated individual policies is not necessarily a bad thing (the fear has always been that this would happen too quickly and cause severe coverage disruption). And this study simply confirms that the law accomplishes all this very, very slowly.