NCPA - National Center for Policy Analysis

Many Companies May Drop Employee Coverage under ObamaCare

February 8, 2013

During the debate that preceded the passage of the Affordable Care Act (or, "ObamaCare"), President Obama promised that "if you like your health care plan, you can keep your health care plan." This statement may come back to haunt him, as many employees may in fact lose their employer-provided health insurance, says The Economist.

  • When the main provisions of ObamaCare are implemented in 2014, surveys suggest that while most companies currently offering their workers insurance will continue offering coverage, many will stop doing so and most will revise their plans.
  • Today almost 150 million Americans rely on their employer for health benefits.
  • The cost of insuring a family has already more than doubled in the past decade to $15,745 for large firms that already leverage their workforce in bargaining with insurers for better rates.

With health care costs expected to continue rising, many employers may view ObamaCare's individual coverage subsidies as an opportunity to drop employer-sponsored coverage and pay higher wages. To curb this, the Affordable Care Act levies a $2,000 fine per worker on employers with 51 workers or more who do not sponsor health insurance.

  • Despite the fine, a 2011 McKinsey survey found that 30 percent of employers would "definitely or probably" drop insurance after 2014. Of the firms that said they actually fully understood the health reform law, 50 percent said they would drop their coverage.
  • While McKinsey's results are on the high side, other survey by Deloitte and Mercer found that approximately 10 percent to 20 percent of employers surveyed planned on dropping coverage in the next three to five years.
  • The Mercer survey also found that 40 percent of companies with fewer than 500 workers and more than 60 percent of companies with more than 5,000 workers expect employees to pay a greater share of their health care in 2013.

Some companies, like Sears, are switching to "defined contribution" plans, which give employees a fixed sum to invest in their health care, much like current pension schemes.

Source: "The Insured and the Unsure," The Economist, January 26, 2013.


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