The Republican healthcare plan could signal the beginning of the end for employer-based healthcare insurance, a perk that millions of Americans take for granted.
Roughly half of Americans were covered by employer-sponsored health plans in 2015, according to the Kaiser Family Foundation. But that could change, according to the Congressional Budget Office’s report on the GOP’s American Health Care Plan.
Lawmakers and regular Americans digesting the findings of the report have focused on the big numbers: 24 million fewer insured and $337 billion in savings over the next decade. But a potentially more troubling sign comes from a comparatively smaller number: 7 million, the number of people the CBO estimates will drop off the roles of employer-sponsored health insurance over the next decade.
More and More Employers Would Stop Offering Coverage
Even defenders of the agency’s assessment of health care reform acknowledge that it had a big miss estimating the number of participants in the Affordable Care Act. One reason for the miss is that employers didn’t drop health care benefits to the extent the CBO estimated.
Things could be different this time around.
“Part of that net reduction in employment-based coverage would occur because fewer employees would take up the offer of such coverage in the absence of the individual mandate penalties,” the CBO report says. “[O]ver time, fewer employers would offer health insurance to their workers.”
“There’s a decent amount of uncertainty. I think there are some reasons to suspect that if it didn’t happen before, it would happen now, because of where the tax credits are in the income distribution,” said Matthew Fiedler, fellow in economic studies at the Center for Health Policy at the Brookings Institution.
With tax credits for workers earning up to $215,000, the Republicans’ health care plan would push the incentives for companies not to offer benefits further up the income spectrum, said Elise Gould, senior economist at the Economic Policy Institute.
“It could particularly impact high-wage employers because they can send their employees into the nongroup market. There could be a push to do that because the income range on the subsidies is much wider.”
If a wider pool of employees opts to take the tax credit and enter the individual market, companies would have a tougher time negotiating with insurers for coverage that is both affordable and comprehensive, with less-attractive offerings leading even more workers to forgo the benefit.
Benefits Still an Important Recruitment Tool
Some experts argue that businesses today have a number of incentives not to rock the boat, especially in a labor market nearing full employment.
“Part of having a good job… is having good benefits. It’s an expectation these days,” said James Gelfand, senior vice president for health policy with the ERISA Industry Committee, a group that represents large employers.
“From SHRM’s perspective, employers continue to believe that offering health benefits is an important benefit to recruit and retain valuable talent,” said Chatrane Birbal, senior adviser of government relations at the Society for Human Resource Management. And for the near future, companies might be reluctant to plunge into an overhaul of their health benefits because many recently did so in order to comply with the Affordable Care Act.
“On principle, that could happen, but especially as the economy is rebuilding itself, we need to remember that the existence of employer-sponsored insurance has always been on a voluntary basis,” said Gail Wilensky, a senior fellow at health care and education organization Project Hope. “Having said that, there’s been a slow, secular decline.”
Smaller Businesses Will Be Impacted First
The next economic downturn that gives corporations the upper hand in job negotiations could accelerate this decline, especially for certain types of businesses and geographic areas.
“In general, it’s going to be firms with higher income workers and younger workers, and it will tend to be firms in lower cost areas because the tax credits are the same dollar amount,” Fiedler said. “Insofar as dropping does happen, I would expect it to be concentrated in smaller firms [because] they’re more likely to have all their employees in a single geographic area.”
“I think that for big companies… they’re not going to drop their people. You’re talking about your smaller businesses or your higher turnover employees,” said Ipsita Smolinski, founder and managing director of Capitol Street, pointing out that companies both big and small already are looking for ways to make workers pay more of their health care costs via high-deductible plans.
“I think all bets are off in a downturn,” she said. “Employers are going to do what suits their bottom line.”