A new American Health Policy Institute report explored whether employers may ultimately end employer-sponsored health insurance, especially as many companies have stopped retiree medical benefits and shifted to defined contribution retirement plans.
The report focused on possible factors that can influence a tipping point for employers to drop health insurance. However, the authors said health insurance is “too important a benefit for employees and executives alike for employers to stop offering coverage” at the moment.
The authors said such a tipping point isn't likely in the near-term, but some employers, particularly smaller ones, will exit health insurance as healthcare costs become unmanageable.
Rather than a large movement of employers dropping health insurance at the same time, the research group predicted either industry-specific or geographic moves away from employer-sponsored coverage.
The tipping point depends on the individual company. Some may gradually eliminate coverage, while others may decide to drop it all at once.
“Suffice it to say that there is a ‘tipping point’ out there. It may be different for each employer, but the fact remains that there is a tipping point,” the report said. “How long it will take each employer to reach that point remains an open question, but it’s safe to say [that point is closer] today than it was yesterday.”
Companies still see health insurance as a competitive advantage, to help employee retention and lure new workers.
Some critics of the Affordable Care Act worried that providing individual market coverage could lead to a downward spiral of employer coverage. That hasn't happened yet.
A move away from employer-based coverage would have big implications for hospitals, providers and payers.
For one, much like with the individual marketplace since the ACA, payers would need years to figure out how to properly balance the risk pool and set premiums. Moving millions more into the exchanges would probably mean high premium increases for at least a few years.
However, moving more employer-based people into the individual market could also help improve the risk pool and offset the highest cost members. Having more people in the individual market would also mean payers would need to invest more in marketing to reach potential customers and not rely as much on contracting with businesses.
For providers and hospitals, businesses dropping health insurance would likely increase uncompensated care as people lose coverage and some decide to forgo coverage entirely.
Uncompensated care is already on the rise, and potentially millions more uninsured could cause those hospitals struggling to make ends meet, especially community and rural facilities, to search for ways to stay afloat.
Federal and state governments may then need to step in and further prop up the individual market, expand public health coverage programs like Medicare and Medicaid and increase payments to hospitals to stabilize an industry that is expected to soon account for one-fifth of the GDP.
The report concludes:
"For those fully vested in the current system, the operating assumption is that healthcare is too important a benefit for employees and executives alike for employers to stop offering coverage ... But, not all employers are the same and all employers do not view their commitment to sponsoring health care the same. Many employers will continue to exit the system as the healthcare costs approach levels that for their organization are unsustainable."