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Employers’ Changing Economic Incentives to Offer Health Insurance under the Affordable Care Act

Author

Listed:
  • Jean M. Abraham

    (Division of Health Policy and Management, University of Minnesota)

  • Roger Feldman

    (Division of Health Policy and Management, University of Minnesota)

  • Peter Graven

    (Center for Health Systems Effectiveness, Oregon Health and Science University)

Abstract

The employer's decision to offer health insurance depends on how much workers value insurance relative to wages, and that value is likely to vary, given the composition of the establishment's workforce and economic incentives such as the preferential tax treatment of premiums for employer-sponsored insurance (ESI). Using the 2008–10 MEPS Insurance Component augmented with information from other sources, we generate new estimates of employers’ price-sensitivity of offering insurance. Our results suggest that small and medium-size employers are sensitive to changes in the tax price of insurance, with small employers exhibiting the largest price-sensitivity. Workforce composition and local labor market conditions also influence employer offers. With these model estimates, we predict how provisions of the Affordable Care Act (ACA)—including the employer shared-responsibility requirement, premium tax credits for exchange-based coverage, and the individual mandate—affect the probability of offering ESI. Findings from this study can inform policy discussions about the implications of ACA provisions as well as subsequent reforms focused on the tax-exempt status of ESI premiums.

Suggested Citation

  • Jean M. Abraham & Roger Feldman & Peter Graven, 2016. "Employers’ Changing Economic Incentives to Offer Health Insurance under the Affordable Care Act," American Journal of Health Economics, MIT Press, vol. 2(3), pages 273-299, Summer.
    • Handle: RePEc:tpr:amjhec:v:2:y:2016:i:3:p:273-299
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    File URL: http://www.mitpressjournals.org/doi/pdf/10.1162/AJHE_a_00045
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    Citations

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    Cited by:

    1. Coleman Drake & Lucas Higuera & Fernando Alarid-Escudero & Roger Feldman, 2017. "A Kinked Health Insurance Market: Employer-Sponsored Insurance under the Cadillac Tax," American Journal of Health Economics, MIT Press, vol. 3(4), pages 455-476, Fall.
    2. Gloria Sheu & Charles Taragin, 2021. "Simulating mergers in a vertical supply chain with bargaining," RAND Journal of Economics, RAND Corporation, vol. 52(3), pages 596-632, September.
    3. Meiselbach, Mark K. & Abraham, Jean M., 2023. "Do minimum wage laws affect employer-sponsored insurance provision?," Journal of Health Economics, Elsevier, vol. 92(C).

    More about this item

    Keywords

    employer-sponsored health insurance; employer decision-making; price-sensitivity; Affordable Care Act;
    All these keywords.

    JEL classification:

    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private

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