Greg Sargent has more on the growing fall-out from McKinsey “employers will drop health care coverage” study. He points to this comprehensive review of employer surveys from Avalere, which came to the exact opposite conclusion:
Overall, our analysis suggests that the ESI market will be fairly stable after 2014 when key ACA coverage provisions go into effect. The microsimulation models estimates from RAND, the Urban Institute, the Lewin Group and the Congressional Budget Office (CBO) show net changes to ESI ranging from –0.3 percent to + 8.4 percent compared to baseline projections without ACA implementation — not major changes in the market (Figure 1).1 Similarly, large-scale employer surveys and analyses conducted by benefits consultants, investor groups, and other consulting firms also confirm that most employers will remain committed to providing coverage. Stability in ESI is driven by expectations that large firms, whose policies cover more people than small- and medium-firm policies combined, will continue offering health benefits.2 Moreover, small businesses that will benefit from new economies of scale in the small business exchanges are likely to offer coverage for their employees through the exchange and possibly newly offer coverage if they previously did not.
Significantly, Avalere also calls out the GOP’s favorite economist, former CBO head Douglas Holtz-Eakin, for conducting a “simplistic” analysis of the effects of the Affordable Care Act on employer-based coverage (the study predicted that a significant number of employers will stop offering insurance). “Holtz-Eakin conducts a simple calculation of whether or not dropping coverage and paying the employer penalty in ACA would be more financially beneficial to both employers and employees (if the latter’s wages are increased by a commensurate amount) than continuing to offer coverage,” the study notes. “However, when benefits consultants conducted similar analyses — taking into account a number of additional factors that employers will undoubtedly consider — they come to the opposite conclusion. They determined that employers, on average, would spend $1,000 more per employee if they dropped coverage.”
Avalere offers three reasons for why employers will continue providing insurance: 1) to recruit and retain employees, 2) historically there has been no viable alternative for employees to obtain comprehensive coverage on their own, and 3) boost worker productivity.