Delay of Employer Insurance Mandate Will Not Cause Major Problems for Affordable Care Act

FOR RELEASE

Monday
August 19, 2013

A one-year delay in requiring large employers to provide health insurance to their workers will not significantly hurt the goals of the Affordable Care Act, but a repeal of the requirement would seriously undermine financial support for the law, according to a new RAND Corporation study.

The one-year delay announced by federal officials in July means that an estimated 300,000 fewer people will have employer-sponsored health insurance during 2014 and the federal government will collect $11 billion less during the period to help support the Affordable Care Act, according to RAND projections.

Both of the numbers are small relative to the overall size of health insurance expansion and revenue generated under the Affordable Care Act. However, if the large employer mandate were repealed, revenue would fall by $149 billion over the next 10 years because of lost penalties — about 10 percent of the total spending offsets being used to support the law.

“Our simulations show the one-year delay of the large-employer mandate will not have a substantial impact on either enrollment in health insurance or financial support for the Affordable Care Act,” said Carter Price, the study's lead author and a mathematician at RAND, a nonprofit research organization. “However, eliminating the large-employer mandate would have a significant impact on financial support for many provisions of the Affordable Care Act.”

Under the law, companies with more than 50 workers must offer workers affordable health care coverage or pay penalties. It's recognized the provision affects a relatively small group of companies because more than 95 percent of large employers already offer their workers health coverage.

Price and study co-author Evan Saltzman used an updated version of the RAND COMPARE microsimulation, which predicts the effects of health policy changes at state and national levels, to estimate the likely impacts of delaying enforcement of the large-employer mandate to Jan. 1, 2015. Among the study's findings:

  • About 1,000 fewer companies — less than 1 percent of large employers — will offer coverage in 2014 because of the enforcement delay.
  • Once the insurance mandate is enforced on large businesses, an estimate 0.4 percent of large employers, who employ 1.6 percent of the nation's workforce, will pay a penalty for not offering health insurance at all.
  • An estimated 1.1 percent of large companies will a pay a penalty for offering unaffordable coverage to their workers. These companies employ fewer than 1 percent of the nation's workforce.

The study, “Delaying the Employer Mandate: Small Change in the Short Term, Big Cost in the Long Run,” is on www.rand.org.

Support for the study was provided by RAND's Investment in People and Ideas program, which combines philanthropic contributions from individuals, foundations, and private-sector firms with earnings from RAND's endowment and operations to support research on issues that reach beyond the scope of traditional client sponsorship.

RAND Health is the nation's largest independent health policy research program, with a broad research portfolio that focuses on health care costs, quality and public health preparedness, among other topics.

About the RAND Corporation

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