Health Care Reform Will Move Millions of Workers Into Different Insurance

Shuffling Around: Health Care Reform Might Change Where Workers Get Insurance

Low-wage workers and employees of small firms will be among 14 million people who may lose their company health insurance under health care reform but most of those workers would qualify for new benefits, the Congressional Budget Office says in a new report.

A net number of about 3 million to 5 million fewer people will get health insurance at work each year from 2019 to 2022 once the law, known as the Affordable Care Act, is fully in place, according to analysis by the CBO and the congressional Joint Committee on Taxation. That figure represents a lot of shuffling around in different parts of the health insurance market.

Under the health care reform law President Barack Obama enacted two years ago, 11 million workers would see their employers drop health benefits and 3 million employees would choose different coverage on their own. Of those 14 million people, 9 million would get insurance on the law's "exchanges," 2 million would sign up for Medicaid and Children's Health Insurance Program benefits, and another 2 million would be uninsured, the report says. In addition, 9 million people will gain insurance at work they wouldn't have without health reform.

"CBO and JCT continue to expect that the Affordable Care Act will lead to a small reduction in employment-based health insurance," the report says. "In CBO and JCT’s judgment, a sharp decline in employment-based health insurance as a result of the ACA is unlikely." And health insurance tied to jobs is already undergoing transformations that have little to do with health care reform.

The Congressional Budget Office and other government and private auditors have produced a mountain of reports over the last three years about what health care reform will do to the insurance market. Their findings about employer-sponsored health insurance have varied widely, with some predicting a massive shift away from the system that currently provides coverage to 154 million Americans and others projecting that more workers will get insurance through their jobs than they do today. The CBO's latest report itself includes "alternative scenarios" that range from projecting that employer-sponsored insurance will go down by 20 million people to projecting it will go up by 3 million.

Why the discrepancies? As the new report makes plain: Economics is complicated.

"There is clearly a tremendous amount of uncertainty about how employers and employees will respond to the set of opportunities and incentives under that legislation. Assessing the effects of broad changes in the nation’s health insurance system requires assumptions and projections about a wide array of technical, behavioral, and economic factors," the budget office report says.

The Congressional Budget Office maintains that employers will still have incentives to offer workplace health insurance. For one, fringe benefits aren't taxed as wages so they're a cheaper form of compensation than paying higher salaries to attract good workers. For another, companies are accustomed to administering health insurance and will continue to do so. The percentage of people who get insurance at work actually went up after Massachusetts enacted its health reforms in 2006, the budget agency notes.

Some companies that wouldn't have provided health benefits may change their approach due to other parts of the law, such as tax credits for small companies or the penalties larger companies will have to pay if they don't offer affordable insurance to employees, the CBO says. Those companies that do drop health insurance for some or all of their workers may pay employees more to help them afford buying coverage on their own, the report says.

Down the line, companies may even reorganize their workforces in response to health care reform, the Congressional Budget Office says. Some may move low-wage workers into separate firms so they can continue providing good insurance to their higher-paid employees. Others may use more part-time workers or contractors they don't have to cover, according to the report.

Earlier this week, the Congressional Budget Office issued a report updating its projections about how much expanding insurance coverage under health care reform will cost and how many people will get new benefits. According to that report, up to 33 million people will gain coverage at a net cost of $1.1 trillion. Both figures are lower than previous estimates.

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