Will Employers Drop Coverage Under Obamacare?

What will Obamacare do for those of us who get health insurance through our jobs? Could our employers decide to drop us? Could we be forced to search for a policy in one of the new exchanges?

The answer depends on who you ask.

McKinsey & Company, a global consulting firm, surveyed employers earlier this year. About 30% said they will definitely or probably stop covering their workers when the health reform law goes into effect in 2014. More than 60% plan a major change of some sort.

Those are scary numbers. But experts have severely criticized McKinsey’s methodology for asking only about current attitudes, not definite plans. And surveys by other consulting firms and research organizations have produced markedly different results.

A survey by Mercer & Company found that only 8% of employers plan to drop health benefits under reform.  One by Towers Watson put the number at 9%.

Avalere Health reviewed the findings of some of the most respected research organizations in the country, including the Rand Corporation, the Urban Institute, the Lewin Group, and the Congressional Budget Office. The predictions of these groups ranged from a decrease in coverage of only 0.3% to an increase of 8.4%. Avalere concluded that the health insurance market will remain fairly stable under reform.

And two reports issued by Robert Wood Johnson Foundation predicted that the number of workers receiving health coverage will increase by almost 10%. (Click here and here for the reports.)

So, what should we really expect?

First, most large companies will probably continue providing coverage. They have systems in place to handle the burden, and their size gives them the leverage to negotiate favorable rates.

However, some smaller companies may drop health benefits, knowing that their workers can find alternative coverage in one of the new exchanges. Companies with just over 50 employers will be most likely to do so, because government subsidies under the law will only be available for firms smaller than that size.

But small and mid-sized companies have been steadily dropping coverage for over a decade in response to rising costs. They would have continued doing so even without health reform. The law may be an easy excuse for doing what they would have done anyway.

And the workers who lose coverage may not find themselves any worse off. The policies sold in the exchanges will be regulated for compliance with minimum standards, and the premiums will be subject to oversight. What’s more, Towers Watson found that some companies plan to increase pay in return for dropping health benefits.

So, if you have coverage through your job, things are not likely to change very much under health reform. And if you don’t, you will for the first time have access to coverage regardless of your health status.

Of course, the picture could change more noticeably in the long-run. But change has been the story for the past several decades and would continue to be with or without health reform.

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