McKinsey Study Aside, Health Law Will Lower Health Costs For Employers

On Saturday, ThinkProgress Health caught up with Jared Bernstein — Vice President Joe Biden’s former economic adviser and currently a senior fellow at the Center on Budget and Policy Priorities (CBPP) — at Netroots Nation in Minneapolis, MN and asked him for his take on McKinsey’s recent report about employers dropping coverage as a result of the Affordable Care Act. Bernstein questioned the study’s increasingly suspect methodology and reiterated that the law would actually lower health care spending for employers:

BERNSTEIN: The health care cost burden on employers has been a uniquely American damper on hiring for a long time. And one of the things you have to recognize about the 1990s…because health care costs that employers faced fell sharply pretty quickly, you could see an employment boom that was quite significant. One of the things I like most about the Affordable Care Act is that it starts to take this burden of health care costs off of the employers. Remember, small businesses are exempt 50 workers or more, there are considerable subsidies in the system, you got the system with a functionality to lower costs over time, you’ve got the exchanges, so there are a number of mechanisms that are going to lower employer costs, that’s going to be good for business.

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Bernstein added that he expected large employers to continue offering group coverage, but said that small employers could see some much needed relief in terms of lower health care costs. All of this is relatively difficult to predict, but broadly speaking small businesses — many of whom could be eligible for tax credits — will be purchasing coverage with lower administrative costs and through exchanges where the additional competition between health care plans would reduce average premiums. Consumers will be encouraged to enroll in lower-cost plans and and the plans themselves will have to to keep their premiums low to attract enrollees. A Congressional Budget Office (CBO) report from November 2009 estimated that on average, families will save hundreds of dollars in the new markets by 2016.