Will Employers Dump Their Employees Onto the Exchanges?
The Affordable Care Act will expand insurance coverage to more than twenty-five million Americans, partly through subsidized private insurance available from newly created health insurance exchanges for people with incomes of 133–400 percent of the federal poverty level. The act will alter the financial incentive structure for employers and influence their decisions on whether or not to offer their employees coverage. These decisions, in turn, will affect federal outlays and revenues through several mechanisms. We model the sensitivity of federal costs for the insurance exchange coverage provision of the Affordable Care Act using the nationally representative Medical Expenditure Panel Survey data set. We assess revenues and subsidy outlays for premiums and cost sharing for individuals purchasing private insurance through exchanges. Our findings show that changing theoretical premium contribution levels by just $100 could induce 2.25 million individuals to transition to exchanges and increase federal outlays by $6.7 billion. (Health Affairs study)
“Our findings show that changing theoretical premium contribution levels by just $100 could induce 2.25 million individuals to transition to exchanges and increase federal outlays by $6.7 billion.”
This is a problem. If ACA works as advertised demand for medical services will skyrocket meaning that subsidies will have to be increased to offset rising prices. This thing will balloon on us.
Right, especially compounded with the likely event that employers will dump many employees into exchanges, costs are going to go through the roof.
I don’t see any way that there isn’t a massive influx of previously employer insured people into the exchanges.
This whole thing is playing out just like the other U.S. entitlement programs: the cost far exceeds projections.
not to mention quality and access concerns.
We can afford it, this is worth the price.
Maybe we can right now, but huge deficit expansion like this will eventually catch up to us. Once we can’t pay off the interest on our loans, the ship will crash and chaos will ensue. This is one more step toward that.
Also, this could cause productivity losses.
How does better health cost productivity?
I just mean in general. More entitlements = Less incentive to work hard and provide for yourself. Not to mention the potential tax liability that is placed on the productive.
I don’t think that that is a big concern, but I get the point.
There’s no logical reason why an employer shouldn’t dump their employees onto the public roll. It just makes good business sense.
Why would they not? The reason most people get coverage though work is because of tax subsidies established 60 years ago. Dumping the company health plan makes a lot of sense. Most workers could get a better deal in the exchange.
The rate of ‘dumping’ will depend a lot on the age and salary demographics of the employer.
Picture a small business with 20 employees that carries group health right now.
Every covered employee pays $250 toward their coverage, and the employer pays the rest.
OK now let’s look at the exchanges.
A young employee making $30,000 can get virtually their entire policy on the exchanges for less than the $250 they are paying now.
But an older employee making $70,000 and no kids at home would be faced with an outlay of at least $7000 and no federal help whatsover on the exchanges.
If the older employee is a key employee, not too many employers are going to make a change.
All I am really saying is that it is very hard to generalize about employer dumping!
Don’t forget there are two types of exchanges – public and private. Many companies are ale to choose which way they will go with their employee benefit plans. They won’t necessarily choose the public exchanges.
I recently attended a seminar on private exchanges. Actually until just a couple of months ago, private exchange participants could get no subsidies. But I think that the Obama crew realized that they needed a backstop in case their own exchanges collapsed.
Anyways, I still think that very few employers who now pay for group insurance will migrate to private exchanges. (Unless the employer is really strapped for cash, which is not that uncommon today.) The issue I raised about how to reimburse employees on a private exchange is still very hard to solve. I do not completely even understand how such reimbursements can be tax free.
There will be some employers who do not now offer insurance who will opt for private exchanges. I think the effect on the federal budget will be pretty tiny.
Bob,
See my post on private exchanges at http://healthblog.ncpathinktank.org/private-exchanges/
Employers could use either an HRA or a 125 plan like they do in Massachusetts.
“The issue I raised about how to reimburse employees on a private exchange is still very hard to solve.”
Would you please elaborate? Are you talking about wage reimbursement? Provider reimbursement? Premium contributions? Something else? Also, please clarify whether your comment about reimbursement applies to public exchanges or private exchanges – or, perhaps, both?
Thanks
My concern is how these plans compare to the metallic plans on the public exchange.
If the employer is providing subsidies for a fully insured plan, it will probably cost them more than self insuring, especially for larger employers.
eElf insuring for $25,000 per participant reduces premiums 60%; self insuring to $50,000, reduces premiums 80%.
Don Levit