No, Obamacare Won’t Actually Force Employers To Drop Health Coverage For Their Workers

From the minute that President Obama signed his landmark health reform bill into law, conservative critics have been issuing dire warnings about how expensive Obamacare will make employer-sponsored health coverage, asserting it would be cheaper for larger companies to drop coverage for their workers — and pay a fine if their employees obtain federally subsidized coverage through Obamacare’s insurance exchanges — rather than provide basic health benefits. As it turns out, those predictions aren’t actually becoming reality.

According to Modern Healthcare, a new “survey of nearly 800 large and midsize employers found that just 6 percent of respondents intend to completely exit the healthcare system over the next three to five years” over concerns about the penalty that Obamacare will level against large companies that don’t provide adequate benefits for their workers.

That assessment stands in stark contrast to some Obamacare opponents’ more outlandish claims. Major conservative institutions and healthy policy experts — including the Heritage Foundation and Douglas Holtz-Eakin, who is a former Congressional Budget Office (CBO) director — have predicted that anywhere between 20 million and 35 million Americans will lose employer-sponsored insurance because of Obamacare. Even respected consulting firm McKinsey and Co. predicted that “30 percent of employers will definitely or probably stop offering [employer-sponsored insurance] in the years after 2014,” the year that most Obamacare provisions — including the employer mandate — kick in.

In fact, that kind of mass exodus would be fraught with risks for companies, considering that approximately 70 percent of Americans receive health coverage through their employer. The prospect of losing workers over decreased benefits is a powerful disincentive for the companies that might have considered ditching health coverage to cut costs. As Jim Winkler of Aon Hewitt’s U.S. health and benefits department put it, employers’ incentive to stop sponsoring health insurance “is strong until you look at the numbers. Between the [Patient Protection and Affordable Care Act] penalties for failing to offer coverage and the ensuing talent flight risk, most employers believe they need to continue to play a role in employee health.”

Instead, employers are more likely to test out innovative ways to lower their health tabs through benefit-model reforms and encouraging their workers to lead healthier lifestyles, which are actually some of the most effective ways to curb health care spending. For instance, as many as a third of employers plan to create their own corporate private insurance exchanges akin to Obamacare’s statewide insurance marketplaces — in fact, some companies have already begun experimenting with such reforms.

Full implementation of Obamacare will make 2014 a transformative year for U.S. health care. The reform law’s historic changes and innovations have — as they should — catalyzed debates over the best ways to improve America’s health care system. But conversations about Obamacare tend to devolve into varying degrees of hysteria and fear-mongering that aren’t based in the reality of what the reform law will do. As this survey’s results show, employers and health care providers are taking real steps to facilitate reform, and 2014 won’t exactly signal the end of employer-based insurance as we know it.