Researchers at the RAND Corporation have established models with which to predict how health-insurance markets are likely to change after implementation of the Affordable Care Act (ACA). Their findings have been published in the New England Journal of Medicine, and the news is good: They expect a big net increase in employer-sponsored insurance offers, contradicting worries in some quarters that the new law would have the opposite effect.
Here are some other conclusions extracted from the report:
- The ACA builds on the employer-based health insurance system by developing exchanges through which small employers can offer coverage and by penalizing large employers (firms with more than 50 employees) that do not offer coverage.
- By uniting small-business employees in a single risk pool, exchanges will reduce year-to-year cost fluctuations and may increase bargaining power and reduce administrative spending per participant.
- The Rand Corp. researchers predict that the number of workers offered employer-sponsored coverage will increase from 115.1 million (84.6% of the approximately 136 million American workers) to 128.7 million (94.6%) after the reform.
- This increase is not driven by penalties levied against large employers. In fact, employer-sponsored coverage is more likely to be expanded in small firms than in big firms, even though the small firms are not subject to penalties.
- Currently, only 60.4% of small-business employees have an offer of coverage; the proportion is projected to increase to 85.9% after the reform.
- The large increase in insurance offers by small businesses is driven by worker demand due to individual penalties for being uninsured and the availability of new, often lower-cost insurance options – resulting, for example, from lower administrative costs – for small businesses that offer coverage on the exchanges.
- The ACA will have a lesser impact on employees of big businesses, as so many are already offered coverage.
- Many employers will find that offering coverage through the exchanges is an attractive option, owing to wider risk pooling, low administrative costs, and expanded choices.