For years, The Agenda has reported dueling predictions from economists and other pundits about whether businesses, especially small businesses, will stop offering health insurance rather than comply with the requirements of the Affordable Care Act. For an example, see Ezekiel J. Emanuel's claim that by 2020, more than 80 percent of private-sector workers will buy their own insurance.
The early evidence, however, suggests the opposite trend. An April study by the non-profit Rand Corporation found that in the six months between September 2013 and March 2014, the number of people who received health insurance through an employer grew from 109 million to nearly 117 million, an increase of about 8 percent. (The number of people who got new insurance from an employer was actually larger than that, but it was offset by the people who lost their company insurance, many of whom replaced that insurance with an individual policy or Medicaid.)
A second, so far unpublished, study by the Urban Institute found a similar but smaller result — the growth in employer provided coverage was about half what Rand reported, according to Genevieve M. Kenney, a health economist with the Institute.
These studies, which rely on much smaller sample sizes than more authoritative government surveys, leave several questions unanswered. Chief among them is whether the increase reflects more workers accepting existing offers of insurance or more companies choosing to offer insurance. Nor is it clear whether the increase is occurring at small businesses, big businesses or both.
According to the latest data from the Census Bureau, businesses with 500 or more workers employ 51 percent of the workforce, while those with fewer than 500 workers have 49 percent. (Those with fewer than 100 workers employ 35 percent.)
To gauge what might be happening now, we can turn to the experience in Massachusetts, where a 2006 health care overhaul served as the model for the Affordable Care Act. And the Massachusetts experience is striking. There, too, in the first year after the overhaul took effect, the number of people insured through an employer grew — not by as much as the RAND and Urban Institute data project, but Massachusetts employers already covered a higher share of the state's residents than employers across America do today.
In the Bay State, the increase did not come from more workers deciding to accept existing offers of health insurance. According to data collected by the state, the so-called take-up rate in 2007 was the same as in 2005, 78 percent. What did change was the number of companies offering insurance. In 2005, 60 percent of the smallest companies — those with between two and nine employees — offered insurance; in 2007, that share shot up to 67 percent, a 12 percent increase. Interestingly, the effect was delayed among companies with between 10 and 50 employees. In 2007, the offer rate among those companies had not changed much from 2005. By 2009, though, the rate had increased to 92 percent from 88 percent before falling again in 2010. Across all Massachusetts businesses, most of which are small, the share offering health insurance increased about 10 percent from 2005 to 2010.
In a 2011 paper recapping the effects of the Massachusetts overhaul on insurance coverage there, Jonathan Gruber, a health economist who helped design the Affordable Care Act, argued that the pressure the individual mandate placed on people to have insurance forced more employers to offer it. "There is no obvious explanation for this increase in employer offering as the law introduces incentives for employers to drop insurance (by covering their low income employees outside the employer setting) and does little to penalize those firms that do drop coverage," he wrote. "The best potential explanation for this result is that there was a non-market impact of the mandate on employer behavior, with employees demanding coverage to meet the mandate and employers increasing coverage to meet the demand."
What was happening in the rest of the United States at that time? In the early 2000s, Massachusetts companies offered health insurance at a rate similar to the country as a whole. (The national rates for offering insurance have been reported over the years in the Kaiser Family Foundation's annual Employer Health Benefits Survey.) This was in large part driven by the smallest companies, which make up the largest share of all businesses. In those years, the share of very small Massachusetts companies that offered insurance closely tracked the national share, while the state's bigger small businesses (especially those with 10 to 24 employees) were more likely to offer employees insurance.
But in 2005 there was a steep drop-off nationally in the number of small companies offering insurance, even as the number ticked up in Massachusetts. Since then, the offer rate across all companies in the United States has stabilized at about 60 percent, compared to 76 percent in post-overhaul Massachusetts.
We will have a better sense of whether a shift similar to what happened in Massachusetts is occurring now in the whole country when the Kaiser Foundation releases its 2014 employer survey, in September. In the meantime, The Agenda will take a look at how Massachusetts's health care law has affected small businesses in the state, especially those offering coverage to employees for the first time. If you own a Massachusetts business and have a story about the law's impact on your company, please share it. Post a comment below, or send us an email.
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