Health Affairs

Employers and Health Care Reform

Bethesda, MD -- A new Health Policy Brief from Health Affairs and the Robert Wood Johnson Foundation explores a provision of the Affordable Care Act of 2010 that is aimed at expanding access to, and strengthening the employment-based health system.

Beginning in 2014, employers with at least 50 full-time employees (or equivalent full- and part-time workers) will be required to offer “qualified” health insurance or face penalties. Although supporters of the provision maintain that the requirement will increase the number of companies offering employee programs, critics predict that many firms will opt to “pay and walk away,” or, in the case of smaller firms, hold back on hiring to avoid reaching the threshold of 50 employees.

The new policy brief examines these aspects of this requirement:

• What’s in the law. Employers must provide “comprehensive” and “affordable” health insurance coverage. Employer-provided coverage must pay at least 60 percent of an employee’s health care expenses; the remaining 40 percent, to be borne by the employee, must cost less than 9.5 percent of an employee’s household income.
  
  
• What firms would pay: Employers who do not offer health insurance will be assessed an annual tax penalty of $2,000 for every full-time employee beyond the first 30 employees. If health insurance is offered, but it is not considered comprehensive or affordable, the employer must pay a $3,000 annual assessment for every employee who declines employment-based insurance and instead obtains government-subsidized coverage through a state exchange.
  
  
• Small business exemptions: Although the law shields companies with fewer than 50 employees from these requirements, it also encourages those with fewer than 25 workers to offer health insurance by making tax credits available for two years, as explained in an earlier Health Policy Brief on Small Business Tax Credits (January 14, 2011).
  
  
• What the likely impact will be: As with other predictions about the impact of the Affordable Care Act, estimates vary. The Congressional Budget Office (CBO) and the Joint Committee on Taxation estimate that by 2019, three million fewer people will have employer-provide coverage because Americans will opt to be covered by more affordable state exchanges. Also, many large firms will be watching to see whether their peer companies will be willing to pay the penalties for dropping coverage—or whether they will continue to regard health coverage as an important component of their compensation strategies in order to attract and retain good workers.
  
  
• What’s next: As the battle over the Affordable Care Act continues, many Republican lawmakers oppose the employer requirement and would like to repeal it. Because President Obama would be likely to veto any repeal effort, it appears that the employer requirement will be here to stay—and is likely to be a subject of debate in the next national election.

Health Policy Briefs are aimed at policy makers, congressional staffers, and others who need short, jargon-free explanations of health policy basics. The briefs include competing arguments on policy proposals from various sides and the relevant research supporting each perspective.

Previous policy briefs have addressed:

-Congress and the Affordable Care Act: Members opposed to the health reform law have pledged to repeal it, replace it, or block its implementation.

-Repealing the 1099 Provision: A future provision of the Affordable Care Act, requiring businesses to file Form 1099 returns with the IRS for goods as well as services to raise revenue, likely to soon be repealed.

-Enrolling More Kids In Medicaid and CHIP: What the federal government is doing to identify and enroll five million eligible children in the United States.

Health Affairs, published by Project HOPE, is the leading journal of health policy. The peer-reviewed journal appears each month in print, with additional Web First papers published weekly at www.healthaffairs.org. You can also find the journal on Facebook and Twitter and download Narrative Matters on iTunes. Address inquiries to Sue Ducat at (301) 841-9962 or sducat@projecthope.org