If the Supreme Court ultimately upholds President Obama’s law, within the next decade workers may find they face a very different health insurance landscape—one where millions of Americans lose their employer-based coverage.
In the run-up to law’s passage, President Obama repeatedly said anyone who likes their health insurance will be able to keep it. However, a study released in mid-March by the Congressional Budget Office (CBO) found up to 20 million Americans could lose their employer-based coverage by 2019.
The CBO examined several scenarios about how the new law would affect employer-based insurance. In what they deemed the most likely scenario, between 3 and 5 million Americans would lose employer-based coverage. This is slightly up from the CBO projection when the law was passed, which concluded 3 million people would lose their coverage.
Projections May Be Low
John Graham, director of health care studies at the Pacific Research Institute, says he’s skeptical about the reliability of the CBO analyses.
“It is very difficult to do a ‘top-down’ estimate of how many people will lose employer-based health benefits, because each employer has to do its own internal analysis,” says Graham. “A lot of factors come into play, especially the wage level within the company. Generally speaking, if a company has lots of people who earn less than 400 percent of the poverty level, it will make sense to drop benefits. Companies may even be planning how to reorganize themselves, e.g., incorporate different subsidiaries, in order to maximize the tax credits and minimize the tax penalties.”
Graham says CBO’s projections may be low, noting last year a McKinsey and Company analysis of the expected impact of Obama’s law found 30 percent of employers could eliminate employer-based health benefits.
Those employees who do continue with their employer-based health insurance may find their employers are changing how they offer it. A survey by Aon Hewitt found 44 percent of the organizations they surveyed thought businesses would prefer a private sector health insurance exchange model as the way to provide health insurance benefits.
Private Exchanges Could Increase
Under Obama’s law, individuals and businesses with fewer than 100 employees can participate in a government health insurance exchange, where insurance will be heavily subsidized by the taxpayers. With larger corporations barred from these government-run exchanges, Graham says they are increasingly looking at establishing private sector exchanges.
“Corporate health-insurance exchanges are interesting but unproven,” Graham says. “They make sense as a way for a large employer to make a more transparently fixed contribution to employee benefits and allow the employee to more tailor his coverage. However, I’m not sure why it’s happening now and not five or ten years ago.”
Although these corporate exchanges may prove to be a good thing, Graham says, there are better ways to reform the health insurance marketplace.
“If individuals owned our own health insurance, we would not have to worry about exchanges, corporate or government, at all,” he notes.