The Health and Wealth of a Nation: Employer-Based Health insurance and the Affordable Care Act

3 - Benchmarking Change: Employer-Sponsored Insurance before the ACA

57 3 Benchmarking Change Employer-Supported Insurance before the ACA The ACA was designed to increase the percentage of individuals with access to health care, to increase the quality of health care, and to control health care costs, as Chapter 1 discussed. Achieving these goals would reduce the discrepancies in coverage that existed in the prereform period. To help achieve its goals, the ACA kept ESI as the cornerstone of coverage for individuals under age 65 and clearly defined requirements for firms, individuals, and governments. In the years preceding passage of the ACA, Massachusetts, Vermont , and Hawaii all enacted similar legislation—Hawaii in 1974; Massachusetts and Vermont in 2006. How firms and individuals responded to the legislation in those states might indicate the types of changes that will occur after the ACA is fully implemented. These responses suggest that the ACA may expand both public and private health insurance coverage . The percentage of uninsured in Hawaii fell from 11 to 10 percent after the mandate (Dick 1994).1 The increased take-up of public insurance in Vermont lowered the number of uninsured after the mandate but potentially decreased the ESI take-up (Deprez et al. 2010). Massachusetts saw a dramatic decline in the percentage of its uninsured population after legislation, but reforms in the insurance market had occurred at about the same time, making attribution problematic (Long 2008). Such changes in ESI might be accompanied by a change in a firm’s behavior that would spill over into other workforce areas. For instance, the National Federation of Independent Business (NFIB 2008) suggests that businesses might increase product prices, close operations, or reduce employment under legislation similar to the ACA. Research supports at least some of these suppositions (Baicker and Levy 2007) and raises new ones. Hawaii’s increase in part-time employment after its mandate (Thurston 1997) suggests that firms might shift employment in ways that reduce worker eligibility for an ESI offer. Furthermore , some of the costs of the legislation might be shifted to workers 58 Maxwell in the form of lower wages (Abraham and Voos 2008), especially with increases in the firm’s premium payments (Sinaiko 2004) or the quality of mandated services in a plan, such as a requirement that families be covered (Baicker and Levy 2007). The impact of the ACA—intentional and unintentional—might disproportionately affect low-wage workers. The ACA’s provisions, like those in Massachusetts, Vermont, and Hawaii, broadly target workers and their families for increased coverage. Low-wage workers frequently fail to meet these coverage requirements (e.g., they are part-time workers ) and are at increased risk of unemployment. Both conditions leave them less likely to obtain an ESI offer, even with expanded coverage, than other workers (Burkhauser and Simon 2007). Moreover, because legislative requirements might change employment opportunities and work hours, low-wage workers could become more vulnerable to shifts that occur with expanded coverage. This chapter discusses the ways in which the ACA might affect whether a firm offers ESI. For those firms that do offer ESI after the ACA takes effect, the chapter discusses how the ACA may affect the access to and quality of the offer. Because my analysis is grounded in CHES data that were obtained from firms in 2005–2006, it provides a benchmark for behavior, allowing me to identify potential changes that the ACA might produce with respect to whether firms make an ESI offer, the access to the offer, and the quality of the offer. It also provides a benchmark for the disparities between low- and high-skilled firms in the ESI offers that existed prior to the ACA reform, so that we can assess the potential for changes in ESI disparities between low-wage and high-wage workers that may occur under the ACA. LEGISLATING TO INCREASE ESI COVERAGE AND REDUCE ESI DISPARITIES The ACA contains several provisions designed to reshape ESI in a way that increases the number of workers who would receive an ESI offer. It has, at its core, provisions that attempt to increase coverage in each of the three areas required for a worker to gain coverage: 1) offer, 2) eligibility, and 3) take-up (Table 3.1). The act recognizes the dif- Benchmarking Change 59 ferent constraints facing firms operating in the small- and large-group markets, and its provisions have structured different incentives for large and small firms to offer ESI. Offer and Access...