For what reason Hiring managers Won’t Eliminate Supplying Health Care Coverage

Critics of the Budget friendly Care Act argue that the law recommends
businesses to cease delivering medical insurance coverage by upon a
penalty on large employers whose workforce receive tax-payer subsidies
within the state-based exchanges. Since penalty is lower compared to a
cost of delivering rewards, hiring managers would have an incentive to
remove their workforce into the exchanges, raising the costs to
taxpayers, the critics say.
But other health economists have long reported that this sorts of study
— advanced by Douglas Holtz-Eakin and others — misses the complexities
involved in employer decision making and today Linda Blumberg, Matthew
Buettgens, Judy Feder and John Holahan of the Urban Institute are out
with a new investigation showing why enterprises would be discouraged to
remove their workers:
The bottom line is that almost all workers' firms will be dominated by
workers who'll have improved benefits and, through the tax system,
improved financial aid through employer provided insurance than through
newly created insurance exchanges. The strength of employee tendencies
may be complicated to study temporarily, and some employers may request
rapid profit in reward reduction as markets accommodate new
circumstances. But over time, protection discounts inevitably would make
the workers that employers most like to keep worse off, and if those
workers searched employment any place else as a result then the firm
could well be worse off as well. It is therefore unlikely that many
employers currently providing insurance coverage will change their
decisions to offer it.
[...]
In general, if an employer drops coverage, better-paid workers will be
worse off. Even if they receive higher cash wages to offset the loss,
they will face taxes on these wages which, keeping overall compensation
at the level of their value to the firm, will not be offset. Exchange
benefits will also be unattractive, relative to employer provided
benefits, for better-off earners. Exchange-based subsidies are limited
to plans with an actuarial value no greater than 70 percent, a value
much lower than provided by the typical ESI plan (85 percent).
The whole report is worth reading here. Generally, my take is that we've
seen fluctuation in the employer health insurance market before reform
and will continue to see changes as we move through implementation. But
employers, who are very interested in controlling their health care
costs, will likely continue to offer insurance for the forseeable future
and when they don't, Americans will have a sensible and affordable
options to fall back on.