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Your Work Will Keep Your Health Plan—for You

A new analysis suggests all those horror stories about businesses scrapping their health plans because of Obamacare are overwrought. But try not to be a spouse or a retiree.
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When Obamacare was still just a gleam in the then-new president’s eye, the intent was to spread the health safety net wider, beyond just government and employer-sponsored plans, so that the 37 million or so Americans without insurance would be covered. But after the gleam became the Affordable Care Act, some observers suggested businesses would shuck the expensive benefit of offering health insurance and let employees bid for coverage in the new health exchanges.

The American Action Forum think tank, for example, predicted in 2010 that perverse but rational incentives—a relatively cheap penalty for employers, a relatively large subsidy for employees—might lead bosses, with the agreement of their workers, to drop health insurance. The forum forecast as many as 35 million workers might lose or leave their employer-sponsored plans. In short, Obamacare was a too-short sheet, and pulling it up to warm your chest would expose your toes to the cold.

As the 2014 deadline for employer provisions approached (since bumped back a year), the business community started rattling its sabers; maybe they didn’t exactly understand it all, but they were agin’ it. In surveys, one in 10 said they planned to drop coverage, or maybe that’s one in three. (The Congressional Budget Office, meanwhile, suggested it would be one in 14 by the year 2019.)

Especially as the economy improves, bosses may be loath to tick off active employees by telling them to noodle around on the Internet looking at health exchanges.

You can almost hear the pleading at the Treasury Department: "During this 2014 transition period, we strongly encourage employers to maintain or expand health coverage."

Three health policy scholars at the University of Michigan have taken a stab at predicting employers’ response to Obamacare combining some known facts on the ground plus simulation models from the Congressional Budget Office, the Urban Institute, RAND Corporation, the Lewin Group, and the Office of the Actuary of the Centers for Medicare and Medicaid Services. Crunching that data, the scholars—Thomas Buchmueller, Colleen Carey, and Helen G. Levy—argue in the journal Health Affairs that fears of a stampede out of employer-sponsored plans are overblown: "Microsimulation models built on sound economic principles have for the most part predicted relatively small declines in employer-sponsored coverage as a result of health reform, and we believe that these predictions are likely to be correct."

In numbers, the authors expect the net change in coverage will run from between a 1.8 percent decline up to a 2.9 percent increase. That's a net change, mind you; individual results may vary.

What about those consultants’ reports noted above, reports drawn from talking to actual employers? Two things to keep in mind: values get skewed because there are lots of small firms but most people work for big ones, and businesses are likely to sign onto health care reform once all the various variables become clear.

And the ACA is just one factor, albeit a big one, affecting decisions on coverage. “We need to resist attributing every change in health insurance from here on to Obamacare,” a release from the university quoted Buchmueller. Or as their paper’s conclusion reads: “The combination of rising health care costs and stagnant earnings for middle-income workers has for decades led to a gradual but steady decline in employer-sponsored insurance. This trend is the appropriate baseline against which to measure the impact of health reform.”

At any rate, the trio suggest that apart from headlines—“It is, perhaps, stating the obvious to add a caution against reading too much into anecdotal reports”—no one will really have a handle on how the business community is reacting until next fall, when data sources like the National Health Interview Survey, the Current Population Survey, and the Kaiser Family Foundation/Health Research and Educational Trust Employer Health Benefits Survey put out reports.

Having been warned off putting too much stock in anecdotes, there’s still a handful of data points out this week that imply we’re looking at the wrong target for the employers' ax. Especially as the economy improves, bosses may be loath to tick off active employees by telling them to noodle around on the Internet looking at health exchanges. As a July report from the Employee Benefit Research Institute found, "The percentage of uninsured workers reporting that they were not offered employment-based health benefits was roughly 40 percent from the mid-1990s through 2003, but has been falling since, reaching 22.4 percent by the end of 2011."

But bosses will be less hesitant to tick off—make that kick off—retirees and dependents.

This week two of those big employers cited by Buchmeuller, Time Warner and IBM, announced they would be pushing their retirees toward public health exchanges and off company-run plans. Other biggies like GE, Caterpillar, and DuPont have already sent their Medicare-eligible retirees to exchanges and limited the newly retired to them. (Of course, company-sponsored retiree pension or health plans are becoming a luxury anyway, Obamacare or no.)

United Parcel Service last month told working spouses of its (non-union) employees that if they could get insurance elsewhere, they need not expect to get it from UPS anymore. The action is not unknown or, to be honest, particularly heartless, but the company did cite Obamacare’s pull-yourself-up-by-your-own-bootstraps ethos in framing its decision.

“But trends start with small numbers,” Paul Fronstin, a senior research associate at the Employee Benefit Research Institute, told the Associated Press. “There’s a herd mentality. When you have a big employer like UPS do this, it’s easier for other employers to do the same thing.”