These provisions include an “individual mandate,” or the requirement that individuals—subject  to certain exceptions—obtain minimum essential health coverage or  pay a tax penalty starting in 2014; the establishment of health insurance exchanges in 2014— essentially, health insurance marketplaces in which individuals and  small businesses can compare, select, and purchase health coverage  from among participating carriers; health insurance market reforms including a requirement that prevents  health plans and insurers in the individual and small group markets  from denying coverage or charging higher premiums because of pre- existing conditions or medical history, and that limits the extent to  which premiums may vary; premium subsidies—which provide sliding scale tax credits starting in  2014 to limit premium costs for individuals and families with incomes  up to 400 percent of the federal poverty level—for purchasing  individual coverage through an exchange; penalties for certain large employers that do not offer qualified health  coverage and have at least one full-time employee receiving a  subsidy (in the form of a premium tax credit or cost-sharing reduction)  in a plan offered through an exchange starting in 2014, or for certain  large employers that provide access to coverage but do not meet  certain requirements for affordability;  tax credits for certain small businesses toward a share of their  employee health coverage beginning in 2010; a 40 percent excise tax on certain employer-sponsored health plans  whose costs exceed a certain threshold in 2018; a state Medicaid expansion effective in 2014 for individuals who are  under 65 years old, have incomes at or below 133 percent of the  federal poverty level, and meet other specified criteria. The models systematically estimate the combined effect of multiple  provisions in legislation, such as PPACA, based on this previous research  and empirical data. However, they have limitations as a predictive tool. Microsimulation Studies Predicted Small Near-Term Changes to Employer- Sponsored Coverage

Among the five microsimulation studies we reviewed, estimates of  PPACA’s net effect on changes in the rates of employer-sponsored  coverage ranged in the near term from a decrease of 2.5 percent to an   In  increase of 2.7 percent in the number of individuals with coverage.particular, three projected an increase in the number of individuals with  coverage. 1.) Two of the studies also indicated that the majority of individuals who lose  employer-sponsored coverage would transition to other sources of  coverage. Employer Surveys Varied Widely in Their Estimates of PPACA’s Effect on Employer-Sponsored Coverage

Employer surveys varied widely in their estimates of employers’  responses to PPACA. Among these   16 surveys, 11 indicated that 10 percent or fewer of employers were likely  to drop coverage in the near term, and 5 indicated that from 11 to   20 percent were likely to drop coverage in the near term. The estimates  ranged from 2 to 20 percent across these 16 surveys. Because these surveys were typically of employers currently offering  coverage, most did not reflect the number of employers that may be likely  to begin offering coverage under PPACA. In addition, two surveys asked respondents how their  decisions to drop or offer coverage may be affected by other employers’  actions. The estimates ranged from  about 2 million to 6 million fewer people covered without the mandate  compared to with the mandate. 2.) Differences in Assumptions, Time Frames of Projections, and Assessment of the Individual Mandate Likely Contributed to Small Variation in Estimates from Microsimulation Studies

Certain differences in factors, such as underlying assumptions about  employer and employee decision making, may have contributed to some  variation in the estimates, although the five microsimulation studies we  reviewed shared methodological similarities and therefore generated  relatively similar estimates of changes to employer-sponsored coverage. For  example, the EPI study, which predicted a net increase of 4 million in the  number of individuals with employer-sponsored coverage, incorporated  some of the statistical modeling techniques and underlying theory of  employer and employee behavior used by the microsimulation models,  and was therefore able to more systematically examine the combined  effects of PPACA’s provisions. Certain researchers have noted key limitations of the study,  including that it did not take into account the impact of PPACA’s individual  mandate, the nonfederal tax advantage of employer-sponsored coverage,  the cost of single health coverage plans, and the nondiscrimination rules  that may prevent employers from dropping coverage for some, but not all,  employees.measure the net effect of PPACA on employer health coverage, thus   Additionally, unlike the other two studies, this study did not  addressing only those that may drop coverage but not those that may  newly offer it. Variation in Estimates from Employer Surveys Was Likely Due to Differences in Survey Methods and Assumptions about Respondent Knowledge of PPACA Provisions

Varying estimates from the 16 employer surveys of the extent to which  employers were likely to drop health coverage may have stemmed from  differences in sampling techniques, the response rates and number of  respondents, the types of employers surveyed, the framing of survey  questions, and the manner in which PPACA provisions were referenced  throughout the survey. Employer Surveys Suggest That PPACA May Have a Larger Effect on Small Employers and Certain Employee Populations and Prompt Some Employers to Change Benefit Designs

PPACA may affect certain types of employers or employers with certain  employee populations more than all employers or employees. PPACA May Also Prompt Employers to Change Health Plan Benefit Design

Several of the 19 employer surveys that we reviewed also indicated that  PPACA may prompt employers to consider key changes to benefit  designs that will generally result in greater employee cost for health  insurance. External Comments

We provided a draft of this report to two researchers with expertise in  employee health benefits issues. They agreed with our report and  provided suggestions and technical comments, which we incorporated as  appropriate. Appendix I: Studies Reviewed by GAO

We reviewed the 27 studies listed below that contained original numerical  estimates of the effect of the Patient Protection and Affordable Care Act  (PPACA) on the prevalence of employer-sponsored coverage—5 based  on microsimulation models, 3 based on other analytic approaches, and  19 based on employer surveys. Microsimulation Models

1. 2. 3. 4. 19.
Why GAO Did This Study

The share of employers offering health coverage has generally declined in the last decade. Researchers believe that certain provisions of PPACA could affect employers future willingness to offer health coverage, such as the availability of subsidized coverage through new health insurance marketplaces called exchanges and an individual mandate, which will require most people to obtain health coverage or pay a tax penalty. Certain PPACA provisions are scheduled to take effect in 2014. Researchers have provided various estimates of the effect PPACA may have on employer-sponsored coverage.
GAO was asked to review the research on this topic. GAO examined (1) estimates of the effect of PPACA on the extent of employer-sponsored coverage; (2) factors that may contribute to the variation in estimates; and (3) how estimates of coverage vary by the types of employers and employees that may be affected, as well as other changes employers may be considering to the health benefits they offer. GAO reviewed studies published from January 1, 2009, through March 30, 2012 containing an original numerical estimate of the prevalence of employer-sponsored coverage at the national level. These included 5 microsimulation models and 19 employer surveys. Microsimulation models can systematically estimate the combined effects of multiple PPACA provisions in terms of both gains and losses of coverage; their results are based on multiple data sets and assumptions. Surveys reflect employer perspectives; they have limits as a predictive tool in part based on varied survey methodologies and respondent knowledge of PPACA.

What GAO Found

The five studies GAO reviewed that used microsimulation models to estimate the effects of the Patient Protection and Affordable Care Act (PPACA) on employer-sponsored coverage generally predicted little change in prevalence in the near term, while results of employer surveys varied more widely. The five microsimulation study estimates ranged from a net decrease of 2.5 percent to a net increase of 2.7 percent in the total number of individuals with employer-sponsored coverage within the first 2 years of implementation of key PPACA provisions, affecting up to about 4 million individuals. Two of these studies also indicated that the majority of individuals losing employer-sponsored coverage would transition to other sources of coverage. In contrast to the microsimulation studies, which estimate the net effect on individuals, most employer surveys measure the percentage of employers that may drop coverage in response to PPACA. Among the 19 surveys, 16 reported estimates of employers dropping coverage for all employee types. Among these 16, 11 indicated that 10 percent or fewer employers were likely to drop coverage in the near term, but estimates ranged from 2 to 20 percent. Most surveys were of employers currently offering coverage and therefore did not also address whether other employers may begin to offer coverage in response to PPACA; however, 3 that did found that between 1 and 28 percent would begin offering coverage as a result of PPACA. Longer-term predictions of prevalence of employer-sponsored coverage were fewer and more uncertain, and four microsimulation studies estimated that from about 2 million to 6 million fewer individuals would have employer-sponsored coverage in the absence of the individual mandate compared to with the mandate.
Differences in key assumptions and consideration of PPACA provisions likely contributed to some variation among estimates from the five microsimulation studies and the 16 employer surveys. Variation among the microsimulation studies may have stemmed from differences in assumptions about employer and employee decision making, the time frames of the estimates, and assessments of potential compliance with the individual mandate. Variation among the employer surveys may be related to differences in survey sampling techniques, the number and types of employer respondents, and the framing of survey questions. For example, some surveys used a random sampling methodology, allowing their results to be generalized across all employers, while others did not. Also, some referred to specific PPACA provisions or provided specific information about provisions to respondents, while others did not.
Some of the 19 employer surveys indicated that PPACA may have a larger effect on small employers and certain populations and may prompt some employers to change benefit designs. For example, 4 surveys found that smaller employers were more likely than other employers to stop offering health coverage in response to PPACA, and 5 found that employers in general were more likely to drop coverage for retirees than for all employees. Nine surveys also indicated that employers are considering key changes to benefit design, some of which may result in greater employee cost for health coverage.
GAO provided a draft of this report to two researchers with expertise in employee health benefits issues. The experts agreed with GAOs report and provided technical comments, which were incorporated as appropriate.