Tallying the ACA's Impact on Enrollment in Employer Plans

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Tallying the ACA's Impact on Enrollment in Employer Plans
Calendar19 March 2015

 

With open enrollment results for 2015 now in, an important question has been answered. While the ACA’s new eligibility requirements that went into effect this year had a big impact on some employers, overall the level of enrollment in employer-sponsored plans was unchanged.

Mercer’s new survey of nearly 600 US employers, “Health Care Reform Five Years In,” found the average percentage of all employees — full-time and part-time — enrolled in respondents’ plans remained constant from 2014 to 2015. While there was a 1.6% increase in the absolute number of employees enrolled, that was the result of a 2.2% increase in the size of the workforce, rather than the changes required by the ACA.

In 2015, employers were required to offer coverage to all employees working 30 or more hours or face penalties. Across all employers in the survey, the average percentage of employees who were eligible for coverage rose one percentage point, from 87% to 88%, but the average percentage of eligible employees who enrolled dropped a point, from 84% to 83%. That left the average percentage of all employees (both eligible and ineligible) who enrolled in 2015 essentially unchanged from 2014, at 74%.

Still, for some employers, enrollment did grow. For one in ten employers in the survey, the percentage of their workforce enrolled in a health plan rose by 5% or more from 2014 to 2015. But others that extended coverage saw low take-up among the newly eligible employers, who either had coverage through a parent’s or spouse’s plan or through Medicaid, or are continuing to go bare. Further, about a third of respondents actually reported lower levels of enrollment, perhaps partly the result of some workers leaving employer plans to seek less expensive coverage through Medicaid or the public exchange.

To understand why the 30 hours rule didn’t have a bigger impact on enrollment overall, it’s important to keep in mind that most employers — 81% of the survey respondents — were already in compliance with the eligibility requirement prior to 2015. And among those employers that did extend coverage to more employees, many found that few of the newly eligible chose to enroll. Among respondents in food and lodging businesses, the industry sector most affected by the 30 hours rule due to high concentrations of part-time workers, the average percentage of employees eligible for coverage rose from 57% to 60%. But overall growth in the percentage of employees enrolled rose by less than one percentage point, to 34%.

Going into 2015, employers were uncertain about the impact of the individual mandate on enrollment levels. While the individual mandate — which requires all individuals who can afford it to obtain coverage or face a tax penalty — went into effect in 2014, in 2015 the tax penalty became much steeper. While it may have inspired some employees to enroll for the first time, other factors may have drawn employees out of employer plans. While 18% of all respondents (and 31% of those with 5,000 or more employees) believe that more employees elected coverage than in past years due to the individual mandate, 7% of all respondents (and 14% of those with 5,000 or more employees) believe some former enrollees now waive coverage because they are eligible for expanded Medicaid.

Additionally, some employers took steps to hold down enrollment growth. This included reducing hours of at least some employees who consistently worked 30 or more hours per week so that they did not become eligible for coverage, or keeping new hires to less than 30 hours per week. However, very few respondents — just 2% — said they cut staff to avoid covering more employees.

The survey also found that employers remain firmly committed to offering coverage. Only 3% of respondents say they are likely to drop their plans within five years. The need to compete for talent is the number-one reason employers don’t drop health coverage — a highly valued benefit — but for those that might be tempted, the ACA makes it that much harder to do.

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