Actuarial value of employer-based insurance more generous than ACA plans
Within the employer market, however, some industries are less generous than others.
Implementation of major coverage provisions of the Affordable Care Act in 2014 raised concerns that workers would move to plans with lower actuarial value, or relative generosity. To better understand the risk of workers moving to lower AV plans in the exchanges, it is important to know whether such a downward trend in AV already is occurring in the employment-based market.
Related: Slipping away: Does the employer-sponsored health care system have an expiration date?
The Employee Benefit Research Institute reached these conclusions after studying AV in the employment-based health coverage market:
- Both average and median AV were about 83% in each year from 2013 to 2019.
- There were differences in average AV by plan type. The average AV for enrollees in health maintenance organizations (HMOs) or exclusive provider organizations was highest. This was followed by the AV of enrollees in fee-for-service plans. Preferred provider organizations and point-of-service enrollees saw an average AV of 85% and 84%, respectively. Plans linked to spending accounts had the lowest AVs.
- Average AV increased for every type of health plan between 2013 and 2019.
- Demographics did not significantly affect plan choice.
- AV varied by industry. Workers in retail, agriculture, forestry, fishing, construction, finance, insurance and real estate are in the lowest AV plans.
“According to our analysis, employment-based health benefits have not declined in value since enactment of the ACA,” researchers said. “If anything, AV has improved slightly over the intervening years. However, we did find variation in AV, in particular, by industry. Those industries with lower AV may not be in a position to improve health benefits and may question the value in providing such benefits were there a viable alternative.”
Coverage provided through employers is the most common form of coverage for Americans under age 65. Although ACA individual market coverage has garnered a lot of attention since it first was offered, it still covers a relatively small proportion of the under-65 U.S. population. Employer coverage is more generous and, considering the employer contribution, a good value for most workers. Employer coverage also is stable, with the percentage of Americans holding this type of coverage increasing from 70.5% to 72.7% between 2013 and 2019.
“Although the ACA ultimately did not cause many employers to drop or reduce the value of the coverage they offered, other policy actions could do so — even though employers appear reluctant to stop offering such coverage,” researchers concluded. “Lawmakers will have to balance the value of helping people obtain a sufficient level of health insurance in the ACA market while preserving the incentives that help to shore up enrollment in employer coverage. Policy proposals under consideration to help the individual market should consider potential unintended consequences in the employment-based health insurance market.”
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