The Affordable Care Act of 2010, intended to extend health insurance to all Americans, may cause an unexpectedly large shift in employer-sponsored coverage, a new study reports.
An earlier report by the Congressional Budget Office predicted that the act would affect health insurance coverage for 7 percent of private-sector employees, about 10 million people. A new survey by the market research firm McKinsey & Company estimates the law will have a much more dramatic effect, causing 30 percent of private employers to drop health insurance after provisions after the act take place in 2014.
Employers with a high awareness of the act are even more likely to drop health insurance coverage. More than half say they will pursue an alternative to traditional employer-sponsored insurance in response to the act. The requirements extend to companies with 50 or more employees.
The shift may have a smaller than expected effect on turnover, McKinsey found. More than 85 percent of employees said they would stay at their jobs even if their employer stopped offering health insurance - though the employees would expect a raise or more vacation in return.
“Health care reform fundamentally alters the social contract inherent in employer-sponsored medical benefits and how employees value health insurance as a form of compensation,” McKinsey said in a statement announcing the survey, which polled 1,300 diverse employers across the country.
Beginning in 2014 citizens who are not offered affordable health insurance by their employers will receive indexed subsidies, which decrease as income rises and stop altogether for employees who make 400 percent of the federal poverty level or more.
Under the plan, even the poorest Americans will be able to purchase health insurance on public health insurance exchanges, which also provide a substitute for employer-sponsored health insurance.
“Employers will have to balance the need to remain attractive to talented workers with the net economics of providing benefits,” McKinsey said. Employers can choose between providing health benefits to every full-time employee or pay a penalty of $2,000 for workers. The penalty is seen as significantly less than the costs of providing health coverage.
Most employers who say they would discontinue health care benefits would compensate with higher salaries, more vacation or better retirement benefits. Higher-income employees would be most impacted by the shift because they are not eligible for federal subsidies.
The law could also increase the proportion of part-time workers, or encourage employers to restructure into two companies, one for high-wage workers with health benefits and one for low-wage workers without.