Providing workers with healthcare coverage still makes economic sense for large employers. However, there are fewer incentives for smaller employers to offer coverage in the new era of healthcare reform. That was the key message in a new national study for the nonpartisan National Institute for Health Care Reform.
The study, led by University of Minnesota researcher Jean Abraham, who worked with the Center for Studying Health System Change, calculated the economic incentives for employers offering coverage to active workers before and after health reform implementation in 2014. The analysis used data from the 2008-2010 Medical Expenditure Panel Survey.
“The findings indicate that the economic incentives to offer coverage will remain strong under health reform for many businesses, especially larger, higher-wage firms,” Abraham said. “But they will weaken for small and low-wage employers – the very establishments that already were most likely to drop coverage because of rising costs.”
For the nation’s healthcare providers, the study points to the importance of regular verification of current insurance coverage, particularly for patients working for smaller businesses that might decide to drop this benefit. If so, there could well be a significant time lag before the patient purchases coverage from another source.
The institute’s study found that pre-reform, all businesses had an economic incentive to offer health insurance because the U.S. government gave preferential tax treatment for both employer and employee premium contributions. Post-reform, employer premium contributions remain tax exempt. In addition, two new policies take effect in 2014: a penalty on larger employers that do not offer affordable health insurance, and premium tax credits for lower-income people to purchase insurance in new state exchanges if they lack access to affordable employer coverage.
In the pre-reform period, the economic incentives of employers to offer health insurance were all positive and increased with firm size. After reform implementation in 2014, the largest firms with 500 or more workers will continue to have a strong economic incentive, with an average incentive of $2,503 per employee, according to the analysis. However, the smallest firms with fewer than 50 workers will face lower economic incentives – an average of $990 – in the post-reform period, in large part because these smaller employers will be exempt from the penalty.