Republicans have long sought to portray the employer responsibility requirement in the Affordable Care Act as a “job killing” measure that would undermine economic growth and encourage businesses to drop coverage. Massachusetts governor Mitt Romney — whose 2006 health care law levies a modest fee on businesses that fail to provide insurance — publicly opposes the requirement and vetoed the provision in his state law before it was reinstated by the Massachusetts legislature.

But according to Boston Globe reporters Michael Kranish and Scott Helman, Romney had initially signaled that he could live with an employer requirement as part of a compromise between the Massachusetts House and Senate to avoid levying a payroll tax on businesses that would have helped finance the expansion of coverage. In fact, state lawmakers said they felt sandbagged by Romney’s ultimate decision to veto the measure:

Asked if there were any partys of the bill he would veto, he said he still needed to review it all but, “We are where we’d hoped we’d be.” Didn’t he consider the penalty on employers a tax, as antitax activists did? And hadn’t he pledged to veto any taxes? “It’s not a tax hike,” Romney responded. “It’s a fee. It’s an assessment.” Businesses and workers who purchased health insurance already paid an assessment to help fund the “free care” pool, he noted, and “it makes sense to expand this assessment.” [...]

Toward the end, he was asked again: was he really okay with the new employer penalty? Romney said he was relieved that what he had feared most—a new, broad-based payroll tax on employers—was not in the plan. That was something, he said, that he “definitely would have been unable to sign.” “This,” he continued, “is of a different nature.”

Romney eventually described the fee as “unnecessary and probably counterproductive,” but employer coverage has generally increased in Massachusetts, as more private employers are now offering coverage than did before reform was enacted.

Sarah Kliff has this very interesting piece arguing that employers who dump coverage as a result of the Affordable Care Act may increase health care costs for their employees, many of whom would have to pay more for insurance in the new exchanges:

For the employer, dropping coverage is a pretty decent deal: A company would see its health care costs reduced by over 40 percent. They don’t drop to zero, however, since the employer would still be on the hook for the fines that come along with not offering coverage.

But for the employee, it’s a pretty lousy deal. Lockton ran the numbers, using data on how much employers pay for health insurance now and how much health insurance on the exchanges is projected to cost.They found that employers foot a significantly larger chunk of the insurance bill than the federal government would, even with the new subsidies they’d receive. The firm predicts their premiums would increase anywhere from 79 to 125 percent if they lose employer coverage and have to go to the exchange. There’s such a big variation because exchange subsidies vary by income: Those who earn less are eligible for a larger subsidy.

Look at the blue section:

So what does this tell us about how employers will react and whether they’ll be more or less likely to drop health insurance coverage? Well, I’d argue that employers are far less likely to do something that leaves their employees — particularly their most valuable better-paid employees — worse off, particularly since the talent can walk across the street to a competitor’s firm. In fact, even if employers were to offset some of the increases with higher wages, the employees would have to pay taxes on those amounts and would still experience a net loss.

Yet another survey, this one from GfK Custom Research North America, finds that employers are unlikely to stop offering health care coverage as a result of the Affordable Care Act. Only 12 percent of businesses surveyed said they would consider dropping insurance:

Even in an environment of uncertainty about the future of health care reform, a majority of employers surveyed (56 percent) say that they are likely to continue to offer employer-sponsored health insurance after health care reform is enacted,… Only 12 percent of benefits decision-makers say they would be very or somewhat likely to drop coverage, and another 32 percent of the 502 private-sector companies surveyed are unsure what they will do.

Projections vary by the size of employer, with only four percent of decision-makers surveyed from those companies with 500 or more employees considering terminating coverage completely. In addition, decision-makers who say they are familiar with health care reform are less likely to foresee their dropping coverage (7 percent, versus 15 percent among those not familiar).

While 87 percent of company health care decision-makers said that increasing costs could force their companies to reconsider offering insurance, “nearly as many, 82 percent, say the effect on employee morale will be important” — suggesting that businesses may think twice about ending coverage if the decision would turn off highly valued employees and send them running into the hands of the competition. (Incidentally, those workers “receive better benefits and, through the tax system, better subsidies through employer provided coverage than through newly created insurance exchanges.”)

More than a hundred members of both parties are urging the super committee to avoid tinkering with the employer tax subsidy for health care coverage, warning that any changes to the long-standing system “would have far reaching consequences that would not only reduce health coverage for millions of Americans, but would also increase long-term federal spending obligations,” the Hill’s Julian Pecquet reports. From the letter:

Considering the tax exclusion is the lynchpin of this framework, capping or eliminating it would erode our largest system of health coverage and incentivize employers to drop or to curtail coverage. For their workforce, substitute coverage would only be available through the individual market, where comparable coverage is more expensive for most consumers– even as new options become available under the Affordable Care Act. And, due to the realities in our insurance system, the change would impact more vulnerable demographics of working Americans to a greater degree than others. [...]

A study on the high-cost health plan tax conducted by the American Academy of Actuaries concluded that the proposal would disproportionately impact early retirees by a striking margin, not because their plans are more generous, but because they are actuarially more expensive to cover. The report also concluded that small businesses and high-risk professions would also be disproportionately impacted, again, not based on generosity of benefits, but because of longstanding actuarial realities.

The GOP’s opposition to ending the tax exclusion is significant, since several prominent Republicans have proposed replacing the Affordable Care Act with a “market based” health care solution that ends the employer tax subsidy and provides tax credits that would allow families and individuals to purchase health insurance coverage on the individual market. Republicans in the House also voted for a very similar plan in 2009 as part of their alternative to Obama’s health reform legislation.

During a speech at the Heritage Foundation earlier this month, Sen. Orrin Hatch (R-UT) strongly came out against the idea, arguing that such a proposal would “disrupt this whole country.”

Critics of the Affordable Care Act argue that the law encourages businesses to stop offering health insurance coverage by imposing a penalty on large employers whose employees receive tax-payer subsidies within the state-based exchanges. Since the penalty is lower than the cost of offering benefits, employers will have an incentive to dump their workers into the exchanges, increasing the costs to taxpayers, the critics say.

But other health economists have long claimed that this kind of analysis — advanced by Douglas Holtz-Eakin and others — misses the complexities involved in employer decision making and today Linda Blumberg, Matthew Buettgens, Judy Feder and John Holahan of the Urban Institute are out with a new study explaining why firms would be discouraged to dump their workers:

The bottom line is that most workers’ firms will be dominated by workers who will receive better benefits and, through the tax system, better subsidies through employer provided coverage than through newly created insurance exchanges. The strength of employee preferences may be hard to read in the short term, and some employers may seek immediate financial gain in benefit reduction as markets adjust to new circumstances. But over time, coverage reductions inevitably would make the workers that employers most want to keep worse off, and if those workers sought employment elsewhere as a result then the firm would be worse off as well. It is therefore unlikely that large numbers of employers currently providing insurance coverage will change their decisions to offer it.

[...]

In general, if an employer drops coverage, better-paid workers will be worse off. Even if they receive higher cash wages to offset the loss, they will face taxes on these wages which, keeping overall compensation at the level of their value to the firm, will not be offset. Exchange benefits will also be unattractive, relative to employer provided benefits, for better-off earners. Exchange-based subsidies are limited to plans with an actuarial value no greater than 70 percent, a value much lower than provided by the typical ESI plan (85 percent).

The whole report is worth reading here. Generally, my take is that we’ve seen fluctuation in the employer health insurance market before reform and will continue to see changes as we move through implementation. But employers, who are very interested in controlling their health care costs, will likely continue to offer insurance for the forseeable future and when they don’t, Americans will have a sensible and affordable options to fall back on.

Over at the Washington Monthly, Ryan Cooper makes a compelling case for why Herman Cain’s opposition to health care reform — from President Clinton’s efforts to Obama’s law — hasn’t done any favors for the small business community he claims to represent:

By staving off any efforts at cost control, Cain and his allies left small businesses in an increasingly untenable position. Health care price increases disproportionately affect small businesses, mostly due to their lack of bargaining power—large companies, with their bigger pools of employees, can negotiate better prices. This is a major drag on the sector, not only making it more expensive for a small business to do the same work as a large one but also impinging their ability to attract talented employees, as large companies can offer better benefits. As Cain and others are fond of pointing out, restaurants are mostly small— according to the NRA, 91 percent of restaurants have fewer than 50 employees, so they are part of this broader trend. Survey data bear this out: a 2008 survey, ironically from the NFIB, concluded: “The ‘Cost of Health Insurance’ continues its reign as the number one small business problem, a position it has held for over 20 years.”

During an interview in 1999, Cain himself “cited health-care insurance as one barrier foodservice operators face in trying to recruit and retain employees” and then “faulted Congress and the Clinton administration for not coming up with affordable health insurance for everyone.”

But despite his opposition — and that of many business owners who see reform in terms of short term cost increases rather than longer-term savings — the Affordable Care Act provides tax credits for small businesses that purchase health insurance for their employees and will offer employers greater choices and purchasing leverage through state-based insurance exchanges in 2014.

Kaiser Family Foundation’s Drew Altman points to polling data which finds that employers don’t believe that they have the tools necessary to effectively control health care spending. “Not more than about a quarter of employers felt any one strategy was ‘very effective,’ and they were divided on virtually every cost-containment strategy they were asked about”:

For example, 22% said consumer-driven health plans were “very effective,” and 19% said they were “not at all effective.” Similarly, 18% said tighter managed care restrictions were “very effective,” while 26% said they were “not at all effective.” The “winner” this year seems to be disease management, garnering the most employer confidence, with 26% calling it “very effective” and 19% calling it “not at all effective.” [...] Many firms also offer wellness programs, and in an answer to a different question, slightly more than half think those programs help to lower costs to some degree.

Look:

Well, there goes the theory that the private market has all the answer for controlling health care spending and the belief that there is any one silver bullet (sorry GOP, tort reform alone won’t do it) for bringing down costs. The fact of the matter is, we still don’t know which strategies will stop health care from eating up a greater portion of our GDP or how best to implement them. So, moving forward, it would behoove everyone to keep all cost control options on the table and work within the existing law to experiment with ways to slow the annual growth of health care. The nation’s future depends on it.