NFIB Study: Small Business Employers believe PPACA will not “reduce cost or regulatory burdens”.

| July 29, 2011 | Comments (0)

Two new studies released by the National Federation of Independent Business (NFIB)  and the Employment Policies Institute illustrate a variety of reasons why employers may find it more financially advantageous for both themselves and their employees to take advantage of the health insurance exchange subsidies after January 1, 2014.

The NFIB study, released today, indicates that the overwhelming majority of small business owners do not expect the law to reduce cost or regulatory burdens, and nearly two-thirds agree that the law will result in premium increases but not in better care. Since enactment, one in eight (12%) small employers have either had their health insurance plans terminated or been told that their plan would not be available in the future. Plan elimination is the first major consequence of PPACA that small business owners are likely to feel.

The NFIB report also finds that low-wage employees, particularly those experiencing a large premium cost-share, have a powerful incentive to bolt an employer’s health plan in January 1, 2014 for the newly established and heavily subsidized exchanges. Should employees begin to leave for an exchange, 26% of small employers currently offering coverage are very likely to explore dropping their health insurance plans and another 31% are somewhat likely to do so. A key factor in a small employer’s decision to drop a current health insurance plan will be the proportion of employees who leave their health plan for an exchange; 43% report that a majority of employees would have to leave before they would drop their plan and 35% claim it would require all of them.

A second study by EPI focused on the affordable coverage requirements in PPACA and how they will apply to employer-sponsored plans. The authors find that, as a consequence of poorly understood factors in the new law, millions of employees may willingly switch from an employer plan to a government subsidized insurance exchange–even if their employer continues to offer coverage.

According to one of the study’s authors, Cornell University economist Richard Burkhauser, “in their original analysis of the healthcare law, the Congressional Budget Office (CBO) predicted that few income-eligible employees currently insured through their employers would take advantage of the generous subsidies in the insurance exchange. But our study finds the opposite: not only is it in the interest of millions of employers to adjust their benefit packages so that employees are eligible to enter the exchange, but we predict that large numbers of those employees will freely chose subsidized exchange coverage.”

The authors report that the Congressional Budget Office (CBO) was instructed by the Joint Committee on Taxation to read the law as requiring employers to make coverage affordable for employees alone. This definition holds significant implications for workers whose employers provide them (but not their family members) with affordable coverage, since that offer disqualifies their family members from accessing subsidized exchange coverage. Using the CBO’s narrow definition of affordable coverage, and assuming employees don’t respond to the incentives created by exchange subsidies, the authors find that approximately ten percent of private sector workers ages 17-64 (9.8 million people) would receive coverage in the insurance exchange. But when the authors redo their model so that employers and employees work together to take advantage of exchange subsidies, the number of the employees insured in the exchange rises by four million.

Many PPACA advocates did not understand the provision in the new law could work this way and assumed the affordable coverage standard would apply to employees and their family members. Final guidance from the federal Treasury Department is expected to be released soon, and if it changes the definition of affordable coverage to include family coverage, too, which many advocates want, the impact on employer-sponsored coverage becomes even more dramatic: employer-sponsored coverage drops to 66 percent from its current level of 75 percent, with over 21 million people now receiving insurance in the health care exchange.

Category: Consumer & Industry News, Industry News, What Brokers Are Saying

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