Will Health-Care Law Prompt Companies to Halt Insurance?

The Wall Street Journal explores the effects of the Affordable Care Act on corporate America.

June 18, 2013

NEW YORK – The Wall Street Journal asked a panel of experts to address whether the Affordable Care Act (ACA) will lead employers to stop offering health insurance.

The panelists included Kevin Kuhlman, manager of legislative affairs at the National Federation of Independent Business; Christine Eibner, an economist at RAND Corp.; and David Marini, managing director, strategic advisory services, at Automatic Data Processing. 

According to Kuhlman, while the precise effects are speculative, “We hear from NFIB members just above the 50-employee threshold that they do plan to discontinue health-insurance coverage or make other personnel decisions to avoid the employer mandate,” he said. “Some smaller NFIB members are concerned that their offer of coverage to employees will restrict certain employees from accessing generous tax credits and cost-sharing subsidies in the individual exchanges.” 

Eibner added: “If the law is unable to contain health-insurance costs…we believe it will lead many employers to stop offering health insurance.” However, she said her company’s model predicts an overall increase in the number of employees enrolled in employer-sponsored coverage. ‘[O]ur most recent estimates showing an increase of about four million people enrolled on employer-sponsored insurance.”

Meanwhile, Marini said that while he doesn’t believe the law will prompt company’s to drop coverage for their employees, it would affect the benefits that they offer. “In a May 2012 ADP survey we found that more employers are offering wellness programs, health savings accounts and high-deductible health plans,” he said, adding that the law will also force companies to manage their part-time population so that they do not get classified as eligible for health insurance coverage.

The panelists also addressed the 50-employee, 30-hours-per-week threshold (companies fitting such a profile would be required to offer health insurance to their employees) and whether companies will seek to cut staff or limit hours to fall under those numbers.

“There is some evidence from past health-insurance reforms to suggest that firms do make these types of structural changes to avoid requirements such as mandates,” Eibner said. “However, coverage in employer-sponsored plans also rose during the same time period, suggesting that the shift to part-time work was not large enough to fully counteract the effect of the mandate.”

Marini said he expects companies in the retail, hospitality and food/beverage industries to limit the number of hours to below 30. However, he said some specialty retailers are assessing sales associate performance numbers to determine whether more experienced workers produce better sales.

“Ultimately, this could lead them to hire more full-time employees with benefits,” he said.

Kuhlman said that he has heard from NFIB members who have taken steps to reduce employee hours from full- to part-time status, or at least that are considering the move. He said there’s a simple solution to such a scenario.

Advertisement
Advertisement
Advertisement