In July, The Government Accountability Office (GAO) released a report estimating the effect the Patient Protection and Affordable Care Act (PPACA) is likely to have on the employer-sponsored health insurance market.
The GAO report is based on data gathered through five studies, each of which used microsimulation to project how employers might react once key provisions of the PPACA are implemented. Overall the studies predicted a range of outcomes, but the total net change expected in the number of individuals covered by employer-sponsored health insurance was less than 3 percent in either direction at most. Changes were expected to be small in the near-term.
Employer surveys predicted more severe effects, according to the GAO, with some estimating that as many as 20 percent of businesses might drop employee benefits, although most indicated 10 percent was the highest percentage likely to do so. Some research did indicate that the majority of those who lost employer-sponsored benefits would find coverage from other sources.
Different assumptions used may account for some of the variations in results that these studies yielded. The sweeping nature of the PPACA and the gradual pace at which its provisions are being implemented make it challenging to estimate its effects. Some changes being seen already are the result of employers anticipating provisions that are not yet active, and they will almost certainly make adjustments as the situation develops further and their assumptions are proven or disproven.
How employee benefit plan administration may be impacted
Some of the research suggested that the PPACA will prompt some employers to change their benefit plan designs. These changes would, in most cases, be designed to limit benefit costs to employers and possibly workers, but might have other objectives as well. Businesses may also take steps such as ending retiree coverage but not plans for current employees. They might also consider ending coverage for spouses and dependents, or similar restrictions in scope.
Additionally, several studies highlighted differences in how companies would react, largely according to their size. Smaller businesses are more likely to drop coverage, according to multiple studies. They may also be more likely to look into plan redesign in an effort to maintain policies.
Ending employee benefits is likely to be an unpopular decision, and may decrease employee satisfaction. Many workers lack confidence in their own ability to shop for coverage, and depend on employer-sponsored benefits. This may place employers in a difficult position, particularly since competitors may or may not choose to end their coverage.
