As many as 37 million Americans who receive health coverage through employers may be better off with the government-subsidized insurance plans that will be offered under President Barack Obama's healthcare reform law for next year, according to a study released on Monday.
The analysis, compiled by researchers at Stanford School of Medicine and published in the journal Health Affairs, suggests that some employees may choose to dump the coverage they receive at work. It also points to a potential counter-trend to surveys of employers, which show that up to 30 percent would consider terminating health coverage for their workers within the first few years of "Obamacare."
"There is definitely going to be some pressure in that direction," said Thomas Buchmueller, a professor of insurance at the University of Michigan's Ross School of Business, who was not involved in the study.
"Workers could say, 'we appreciate that you offered us coverage all these years, but we'll be better off on the exchanges, so give us the cash and we'll go.'"
That scenario, which would cost the federal treasury billions of dollars above what it has already projected, reflects the complicated financial carrots and sticks at the heart of Obama's 2010 Affordable Care Act (ACA).
On the one hand, it requires large employers with 50 or more workers to offer health insurance or pay a $2,000-to-$3,000 annual penalty per full-time worker. About 170 million Americans have health insurance through their own job or through a family member's; such coverage is available to 80 percent of full-time workers.
On the other, the law allows workers to buy coverage on new state-based exchanges and receive federal subsidies to help pay the premiums and deductibles, if their employer-sponsored insurance is deemed unaffordable according to a government calculation.
Roughly "37 million people would be financially better off switching to the exchange" from employer-sponsored insurance, said Dr. Jay Bhattacharya of Stanford School of Medicine, who led the study.
"The reason is that these workers would qualify for substantial subsidies to buy exchange insurance," he said. As a result, the subsidized Obamacare premium will be less than what they pay for employer-based insurance. The cost to the federal treasury if all 37 million switch: $132 billion a year in subsidies, according to the study.
If premiums for employer-based coverage rise by even $100 a year, another 2.25 million people would be better off, Bhattacharya and his colleagues calculate. That would increase federal outlays another $6.7 billion.
"Pure economic benefit for workers may or may not be a good enough reason for employers to drop coverage," Bhattacharya said, since employers will pay a penalty starting in 2015 for not providing insurance. "Our point is that total federal government obligations are incredibly sensitive to the decisions made by employers."
Policy makers, the Stanford team concludes, "should plan for the possibility that the exchange subsidies may end up costing the federal government much more than currently projected."
The Stanford team did not receive outside funding for their study.
For now, the vast majority of employers, especially large ones, say they are not dropping health benefits. A second study in Health Affairs concludes that the net increase or decrease in the number of workers with employer-sponsored health insurance will be only a percent or two.
That jibes with a survey released last month by the National Business Group on Health, which represents large employers. It found that 1 percent were considering moving current employees to exchanges in 2014, and 30 percent might do so after that.
"Large employers are pretty certain they won't be out of the business of offering health insurance for active employees any time soon," said NBGH president Helen Darling. "It's still going to be a competitive benefit" in attracting employees.
Obamacare is already being cited as the cause for major shifts in how employers are providing health benefits, including a decision by United Parcel Service to drop coverage to spouses of non-union employees who have access to insurance through their own jobs.
"Some employers will drop coverage, and more often than not when they say it's the result of the ACA, it's probably not," said Michigan's Buchmueller, who led the study projecting employer behavior. "Firms have made adjustments to benefits for years and years, but this is the first time there has been a single target to blame it on."
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