ACA/Obamacare: A Brief History of the Rise and Fall of Employer Sponsored Health Insurance

‘After the Affordable Care Act’s employer mandate takes effect, Buchmueller expects most large employers to continue offering health insurance because tax subsidies and economies of scale remain substantial and because risk-pooling remains effective. “The individual health insurance market is still plagued by adverse selection,” he notes. “But with employer-sponsored coverage, you have a group of people who have been brought together for reasons other than purchasing insurance. You have a range of ages, and generally it’s a relatively healthy pool.”

Thomasson agrees, but she hedges her prediction with an alternative scenario: What if one high-profile firm dropped its coverage, paid the penalty, and raised wages by more than enough to cover the average cost of obtaining health insurance in an exchange? “That firm might lure the people who are less attracted by benefits — the healthier, younger, smarter people,” she says. Then other firms might start competing on the basis of higher wages instead of better health insurance.

Just as government loopholes for employer-sponsored health insurance have distorted the labor market, government mandates for employer-sponsored health insurance are likely to distort the labor market, too. “My guess is we will see changes on the margin in the short run,” Thomasson says. “For example, firms that are close to that 50 limit may act differently, but I think it’s going to take a few years for people to see how it all will work.”

Large companies that employ many low-wage workers will face the biggest challenge, Buchmueller predicts. “Those firms are toying with ideas of shifting workers to part-time schedules or just sucking it up and offering them benefits or paying the penalty. But for the bulk of large firms that are currently offering insurance, the calculation has not changed that much.” ‘ - From Loophole to Mandate, Econ Focus, Federal Reserve Bank of Richmond, first quarter 2014, released 08/2014

Link to the entire article appears below:

http://www.richmondfed.org/publications/research/econ_focus/2014/q1/pdf/economic_history.pdf?WT.si_n=Search&WT.si_x=3