Monitoring the Impact of the Affordable Care Act on Employers: Literature Review

RESEARCH REPORT Monitoring the Impact of the Affordable Care Act on Employers Literature Review Fredric Blavin Bowen Garrett Linda Blumberg Matthew Buettgens with Sarah Gadsden and Shanna Rifkin October 2014 HEALTH AND HEALTH POLICY ABOUT THE URBAN INSTITUTE The nonprofit Urban Institute is dedicated to elevating the debate on social and economic policy. For nearly five decades, Urban scholars have conducted research and offered evidence-based solutions that improve lives and strengthen communities across a rapidly urbanizing world. Their objective research helps expand opportunities for all, reduce hardship among the most vulnerable, and strengthen the effectiveness of the public sector. The Urban Institute strives for the highest standards of integrity and quality in our research, analyses, and policy recommendations. Urban scholars believe that independence, rigor, and transparency are essential to upholding those standards. As an organization, the Urban Institute does not take positions on issues. Funders do not determine research findings or influence scholars’ conclusions. Urban scholars and experts are independent and empowered to share their evidence-based views and recommendations shaped by research. The Urban Institute is a nonprofit policy research organization. It has been incorporated and is operated as a public charity. It has received official IRS recognition of its tax-exempt status under section 501(c)(3) of the Internal Revenue Code. The Institute’s federal ID number is 52-0880375. Donations will be tax deductible and may be disclosed to the IRS and the public, unless given anonymously. We are committed to transparent accounting of the resources we receive. In addition to required tax filings, a copy of the Urban Institute’s audited financial statement is available to anyone who requests it. Copyright © October 2014. Urban Institute. Permission is granted for reproduction of this file, with attribution to the Urban Institute. Contents Acknowledgments v Executive Summary vi Methods 2 Trends 3 Employer-Sponsored Insurance 3 Premiums and Cost Sharing 5 Decision to Offer Insurance 9 Employee Take-Up of Insurance 12 Other Notable Trends 14 Self-Insurance 14 Employee Plan Choice 16 Affordable Care Act Provisions That Affect Employers 18 Affordable Care Act Provisions Affecting Employers of All Sizes 19 Affordable Care Act Provisions Affecting Larger Employers 19 Affordable Care Act Provisions Affecting Smaller Employers 20 Small-employer tax credits 20 Benefit requirements 21 Rating requirements 21 SHOP Marketplaces for purchase of small-group coverage 22 Health Insurance Marketplaces for Individual Coverage, Medicaid, and the Individual Mandate 22 Evidence on the Likely Impacts of the Affordable Care Act on Employers 23 Microsimulation Model Estimates of Effects of the Affordable Care Act on ESI Coverage 23 Estimated Changes in Incentives for Employers to Offer Coverage under the Affordable Care Act 25 Evidence from Massachusetts on Effects of Health Reform on ESI Coverage 26 Employer Attitudes about Continuing to Offer Health Benefits under the Affordable Care Act from Employer Surveys 27 Employer Choices Relating to Part-Time Work 29 Increased Self-Insurance by Small Firms 30 SHOP Marketplaces 31 Discussion 31 Notes 34 References on Trends and Economic Behavior 36 References Related to Affordable Care Act 41 About the Authors 45 List of Exhibits Exhibit 1. Average Total Single Premium per Employee at Private-Sector Establishments Offering Health Insurance by Firm Size, 2002–12 6 Exhibit 2. Average Total Family Premium per Employee at Private-Sector Establishments Offering Health Insurance by Firm Size, 2002–12 6 Exhibit 3. Percentage of Private-Sector Employees Enrolled in Health Insurance Plans with Deductibles by Firm Size, 2002–12 8 Exhibit 4. Average Individual Deductible per Employee with Single Coverage in Health Insurance Plans at Private-Sector Establishments by Firm Size, 2002–12 8 Exhiibit 5. Percentage of Private-Sector Establishments Offering Health Insurance by Firm Size, 2002–12 10 Exhibit 6. Percentage of Private-Sector Employees Enrolled in Health Insurance at Establishments Offering Health Insurance by Firm Size, 2002–12 13 Exhibit 7. Percentage of Private-Sector Establishments Offering At Least One Self-Insured Health Plan by Firm Size, 2002–12 15 Exhibit 8. Percentage of Private-Sector Establishments Offering Two or More Health Insurance Plans by Firm Size, 2000–12 17 Exhibit 9. The Affordable Care Act’s Estimated Effects on ESI Coverage, from Microsimulation Models24 Exhibit 10. Employer Attitudes toward Dropping ESI Coverage from Surveys of Employers 28 Acknowledgments This report was prepared by the Urban Institute under contract HHSP23320095654WC/HHSP23337048T to the US Department of Health and Human Services, Assistant Secretary for Planning and Evaluation (ASPE). We would like to acknowledge the contributions of Thomas Musco, Elizabeth Hadley, and R