Employers have a strong incentive to offer health insurance, primarily since employer-sponsored health insurance is not subject to federal or state income taxes, Medicare, or the Social Security payroll tax, according to a report by the Urban Institute. The largest firms still have a strong incentive to offer health coverage under the ACA. Firms with fewer than 50 employees may face significantly lower, but still positive incentives to offer coverage.
The Affordable Care Act is expected to have modest effects on employer-sponsored insurance coverage, with estimates ranging from a loss of 6 million to a gain of 13.6 million covered lives. Studies consistently find larger gains in coverage among small firms than among large firms. The percentage of firms that expect to stop offering employee health benefits because of the Affordable Care Act is in the single digits. The Affordable Care Act could increase incentives for small firms to self-insure in states that don’t regulate stop-loss coverage, particularly those with employees at low risk of high medical expenses. The Affordable Care Act increases incentives to switch full-time workers to part-time to avoid the employer mandate penalty. But the effect of these incentives is likely to be small. So far, there has not been a shift toward part-time work because of the Affordable Care Act. For more information, visit www.urban.org
