VII. Key Issues: Regulation & Reform >> C. Health Reform >> Affordable Care Act (ACA) >> ACA and Employers (last updated 2.12.17)
Provisions Affecting All Employers
- Prohibition of Discrimination in Favor of Highly Compensated Individuals. Adds Sec. 2716 to the Public Health Service Act: employers that provide health coverage will be prohibited from limiting eligibility for coverage to highly compensated individuals.
- Appeals Process. Adds Sec. 2719 to the Public Health Service Act requiring plans to implement an effective internal appeals process of coverage determinations and claims and comply with any applicable State external review process. If the State has not established an external review process or the plan is self-insured, the plan shall implement an external review process that meets minimum standards established by the Secretary. The Secretary may deem the external review process of a plan in operation as of enactment to be in compliance with this section.
- “Cadillac” Tax on High Cost Health Plans. Under the ACA, if the aggregate cost of employer-sponsored health insurance coverage for an employee or a retiree (including surviving spouses) exceeds $10,200 for individual coverage and $27,500 for family coverage, a nondeductible 40 percent excise tax is applied to the amount of the employee benefit that exceeds the tax threshold. CBO estimates that 75% of revenues will come from income and payroll taxes paid on higher wages workers receive from employers to compensate for the loss of health insurance coverage. See Excise Tax on Comprehensive Health Insurance Plans (Cadillac Tax).
- Congressional Budget Office. Estimates for the Insurance Coverage Provisions of the Affordable Care Act Updated for the Recent Supreme Court Decision (July 2012). Reflects the impact of the Supreme Court decision to make the Medicaid expansion optional for states. CBO estimates that in 2012 and 2013, 1 million gained employer-based coverage, but that starting in 2014, the net number covered through employer plans would be 1 million lower than it would have been otherwise, a figure that will grow to 6 million lower by 2019 (after which the net loss tapers off to 4 million by 2022).
- McCosh, Cameron. Labor Markets and Health Care Reform: New Results. American Action Forum. August 25, 2011. Estimates that up to 35 million workers and dependents will lose employer-based coverage due to employer incentives to drop coverage, make it inadequate or unaffordable.
- Nowak, Sarah A., Christine Eibner, David M. Adamson and Evan Saltzman. Effects of the Affordable Care Act on Consumer Health Care Spending and Risk of Catastrophic Health Costs. RAND Corporation, October 1, 2013. Using the RAND COMPARE microsimulation model, authors estimate that in 2016, 1.5 million previously insured through employer-sponsored insurance will become uninsured.
- ACA Architect Emanuel Predicts End of Employer-Sponsored Health Insurance. “‘Fewer than 20% of workers in the private sector will receive traditional employer-sponsored health coverage’ by 2025.” (New York Times, 3.21.14)
- Obamacare Architects Disagree on the Future of Job-Based Insurance Coverage. “’It’ll be a matter of a few big employers, blue-chip companies,’ Emanuel told The New York Times, adding that the dramatic shift from employer-sponsored insurance could be labeled as ‘positive, unintended consequences.’ But Jonathan Gruber, an economics professor at Massachusetts Institute of Technology and another Obamacare architect, argued in the same New York Times article that ‘there’s not going to be massive erosion’ in employer-sponsored health coverage. Gruber also asserted in November that the health law would not affect Americans who get their insurance through their employer. According to The Daily Caller, Gruber told Chuck Todd’s ‘The Daily Rundown’ on MSNBC, ‘This law is really leaving those with employer insurance, those with government insurance alone. We’re talking about a small minority of Americans that buy their insurance through the individual market.’” (The Foundry, 3.25.14)
- Why Employers Will Stop Offering Health Insurance. “Mr. Emanuel argues that in the next two or three years, ‘a few big, blue-chip companies will announce their intention to stop providing health insurance. Instead, they will raise salaries substantially or offer large, defined contributions to their workers. Then the floodgates will open.’” (New York Times, 3.26.14)
- S&P Capital IQ. The Affordable Care Act Shifting Health Care Benefit Responsibility Away From Employers, Potentially Saving S&P 500 Companies $700 Billion. April 30, 2014. “2016 has a very modest 10% of employees transitioned to the exchanges. Over the following few years,more companies make the transition until only a minority (10% of employees) would keep traditional plans in 2020…Companies will count on employee eligibility for government subsidies to obviate the need to continue making the contributions that they have made in the past.”
- Ezekiel Emanuel Further Explains His Prediction That Employers Will Drop Health Insurance. “Our recent interview with Dr. Ezekiel J. Emanuel about his provocative prediction that most employers will abandon health coverage by 2025 struck a nerve with You’re The Boss readers…It’s worth noting that among those readers who identified themselves as small-business owners, there was little disagreement: Most expressed a strong desire to get out of the health insurance business. ‘I have provided health insurance for 30 years and am dropping it in 60 days,’ wrote J of New York. To his employees, he continued, health care costs are an abstraction, ‘and my contributions to it are not clearly recognized. Now they will be.’” (New York Times, 4.7.14)
- Envisioning the End of Employer-Provided Health Plans. “By 2020, about 90 percent of American workers who now receive health insurance through their employers will be shifted to government exchanges created by the health law, according to a projection by S&P Capital IQ, a research firm serving the financial industry. It’s not an outlandish notion. Ezekiel Emanuel, an architect of the Affordable Care Act, has long predicted a similar shift. But the scope and speed of the shift is surprising.” (New York Times, 5.1.14)
- Sunset Looms for Employer Health Plans: Everybody, Into the Exchanges! “A study released last week by financial research firm S&P Capital IQ predicts that by 2020, 9 in 10 workers currently receiving health insurance through their employer will instead be managing their own health plan, 401(k) style, on a government exchange created under Obamacare. The report goes on to estimate that by 2025, the S&P 500 companies — America’s short list of corporate giants — would save $700 billion, or 4 percent of their total value, by discontinuing employee health plans. For all U.S. companies with more than 50 employees, the savings would be closer to $3.25 trillion, the study claims. ‘According to model estimates, employers are set to benefit the most as the government takes on a larger funding role,’ according to the report.” (Bankrate.com, 5.6.14)
- Recently-Released Videos of ACA Architect Reveal Covert Plan to Gradually Eliminate Employer-Based Insurance Coverage. “Anyone who has listened to the Gruber tapes has heard Prof. Gruber’s repeated references to the “three-legged stool” that forms the core of Obamacare. However, those who pay close attention to his remarks–variously characterized as “arrogant” (Charles Krauthammer), “careless” (New York Times), “dumb” (Ezra Klein), “ill-advised and indefensible” (Times Argus), “offensive” (New York Times), and “stupid” (David Axelrod) – may have detected that Gruber enthusiastically endorses (and Obamacare contains) a more sinister three-legged stool of deception regarding employer health plans.” Conover, Christopher J. (Forbes, 11.24.14)
- Few Employers to Face ACA’s “Play or Pay” Penalties, But Many Still Feel the Pain. “In a recent survey of 644 employers, Mercer asked employers what changes they would like to see made to the ACA. Repealing the excise tax was first, with 85% in favor, but repealing the employer mandate was second, favored by 70% (see Figure 1). ‘It’s not because they don’t want to offer coverage. It’s because proving that they offer coverage is so much work,’ said Tracy Watts, Mercer’s leader for health reform…About three-fourths of survey respondents say that their enrollment levels have not changed due to the ACA. While 22% have seen an increase in enrollment, most say the increase was slight (less than 5%), and 4% of respondents say enrollment has decreased (see Figure 2)…When asked about the impact of the ACA on their organization, 20% of survey respondents say they have experienced higher cost and 29% say they have made unwanted plan design changes to avoid excise tax exposure. At the same time, 84% say that the additional administrative burden has had a significant impact – and 51% describe it as ‘very significant.’ In addition, the requirement to offer coverage to ‘substantially all’ employees working 30 or more hours per week will get harder to meet in 2016 when the definition of ‘substantially all’ increases from 70% to 95%.” (Mercer, 4.13.16)
- Employee Benefit Research Institute (April 2016). “Between 2012 and 2015, the percentage of workers reporting that they are satisfied with the health benefits they currently receive fell from 74 percent to 66 percent.” (Kaiser Health News, 4.1.16)
- Higher Health Costs Cut into Employer Profit Margins. “Employers continued to report higher health costs, due in part to changes under the law including new taxes on insurance premiums and penalties for individuals who go without coverage. Monro Muffler Brake Inc. said in a call with investors that rising health costs would limit improvements in operating margin for the year ending next June.” (Wall Street Journal, 8.4.14)