Study: ACA did not cause employers to drop coverage

When the ACA went into effect, it supplemented the existing employer-based system but did not, as many feared, replace it.

Employers may have opted against changing their insurance offerings based on several factors, including a desire to offer what best served their employees. (Photo: Getty)

One of the biggest fears about the implementation of the Affordable Care Act has not come true, according to a new study: employers have not dropped health care coverage of employees as a result of the health reform law.

The new study, conducted by the University of Minnesota’s School of Public Health and published in the Journal of Health Economics and Management, looked at how the ACA affected employer-based health insurance. When the ACA went into effect in 2014, it supplemented the existing employer-based system with ACA insurance exchanges that individuals could buy into, and expanded Medicaid coverage in states that chose to participate.

Related: 4 reasons employer-sponsored health insurance won’t go away

“Policymakers were concerned that employers might drop health benefits to cut costs because their workers now had an option to buy individual coverage, or if they were a very low income worker, qualify for Medicaid,” says Jean Abraham, the study’s lead author and a professor at the U of M’s School of Public Health. “Our research shows this wasn’t the case.”

The study’s data came from the Medical Expenditure Panel Survey, which polls more than 20,000 businesses across the U.S. annually about their health insurance spending. Abraham and colleagues looked at data from the years 2010-2015, which includes years before and after the ACA was implemented.

The study made four major findings:

  1. An employer’s probability of offering insurance did not decline as a result of the expansion of Medicaid eligibility in their state.
  2. There were no significant changes in the percentage of eligible workers who opted to enroll in their company’s health insurance program.
  3. There were no significant changes to the out-of-pocket premium required to obtain coverage through the employer in states that expanded Medicaid compared to those that did not.
  4. There was some evidence of an inverse relationship between expansion of Medicaid and the percentage of an employer’s workers eligible for coverage. In states that expanded Medicaid eligibility, a slightly lower percentage of workers were found to be eligible for their employer’s insurance following the Medicaid expansion when compared with employers in states that did not expand Medicaid.

“The small decreases in workers who are eligible for insurance from their employers in states that expanded Medicaid suggests employers may have tightened up their definition of full-time status which is often a determinant of eligibility,” says Abraham. “That said, we were surprised that our results didn’t show this effect to be concentrated in businesses that had a high percentage of low-wage workers who could conceivably qualify for Medicaid or subsidized Marketplace coverage under the expansion.”

Abrams added that employers may have opted against changing their insurance offerings based on several factors, including a desire to offer what best served their employees, rather than what would save money in the short term. Also, employers might have been influenced by the ongoing political debates and uncertainty around the ACA, which could make them more hesitant to dramatically change their benefits approach.

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