Large Employers Poised to Dump Health Insurance

A new House Ways and Mean Committee report on the impact of the Patient Protection and Affordable Care Act (ACA) on large employers suggests that companies will be compelled by the law’s huge financial incentives to drop health insurance benefits for employees.

A statement by the National Center for Policy Analysis, a nonpartisan public policy research organization, summarized the incentives in the congressional committee’s report:

[D]ata from America's Fortune 100 companies show they could save hundreds of millions of dollars a year under the new health care law by simply terminating health insurance for their workers and dumping these employees into taxpayer-funded health care exchanges.

The complete report, entitled "Broken Promise: Why ObamaCare Will Force Americans to Lose the Health Care Coverage They Have and Like," was released online May 1 in PDF format. While highly partisan in tone, the report contains research documenting the lopsided incentives employers face to drop health insurance benefits in 2014.

In total, the 71 Fortune 100 companies that responded to this inquiry could save an estimated $28.6 billion in 2014 alone by eliminating health insurance coverage for their more than 5.9 million U.S. employees (impacting more than 10.2 million employees and dependents covered by those plans) and instead paying the $2,000 per full-time employee fine....

And it's not just private employers who will save billions of dollars. State governments -- among the largest employers in the country -- will also face budget pressures to drop coverage for state workers.

In an op-ed for The Wall Street Journal, former Tennessee Gov. Philip Bredesen noted that  his state could save $146 million in 2014 by dropping health insurance coverage and paying the penalties. State employees would not lose out on any care, Bredesen said. They would just be shifted to the insurance exchange. And that's just the tip of a mountain of public employees who could lose employer coverage. Bredesen:

That's just for our core employees. We also have 30,000 retirees under the age of 65, 128,000 employees in our local school systems, and 110,000 employees in local government, all of which presents strategies even more economically attractive than the thought experiment we just performed. Local governments will find eliminating all coverage particularly attractive, as many of them are small and will thus incur minor or no penalties.

The House Ways and Means report concludes that its survey of Fortune 100 companies shows the ACA "contains a number of policies that create perverse financial incentives for employers to stop offering health insurance to their employees."

Source: "Job-Based Health Coverage to Become Even More Expensive under Affordable Care Act," National Center for Policy Analysis, May 2, 2012.
Source: "BROKEN PROMISE: Why ObamaCare Will Force Americans to Lose the Health Care Coverage They Have and Like," U.S. House of Representatives, Ways and Means Committee, May 1, 2012.
Source: "ObamaCare's Incentive to Drop Insurance," The Wall Street Journal, Oct. 21, 2010.
Image courtesy of Rajiv Patel (Rajiv's View) used under its Creative Commons license.

Steve O'Keefe is a freelance writer, author and book editor.