CBO Predicts No Major Shift in Employer Coverage Under House Pay-or-Play Provisions

Janice Simmons, for HealthLeaders Media , July 27, 2009

During the House Ways and Means hearings on the Tri-Committee health reform bill (HR 3200) mid-July, a question was asked numerous times by Republican members: Would larger employers be enticed to give up paying for their employees' health insurance under proposed "shared responsibility" requirements--which required all individuals to be insured--if the federal penalty was not high enough?

An analysis released Sunday from Congressional Budget Office Director Douglas Elmendorf took a look at this issue and several other coverage issues.

Under these so-called "pay or play" provisions of the House bill, larger employers must offer insurance to their employees or pay an 8% annual payroll tax. In most cases, "the combination of the subsidy from the current tax exclusion and the penalty for firms that did not offer qualified coverage" would provide a strong financial incentive for employers "to continue offering coverage to their workers," the CBO analysis said.

"Consistent with the available evidence, we anticipate that an employer would generally take into account the effects on all of its workers in deciding whether or not to offer coverage," CBO said. In most cases, having an "employer offer coverage would be the best option for the workforce overall, even with the new insurance exchanges."

Overall, CBO said that about 12 million people who would not be enrolled in an employment based plan under current law would be covered by one in 2016, "largely because the mandate for individuals to be insured would increase workers' demand for insurance coverage through their employer."

In other findings:

  • CBO said it did not anticipate a "substantial shift" from private insurance to Medicaid. Specifically, it said that about 1 million people who "would otherwise have employment based insurance or individually purchased coverage would end up enrolling in Medicaid in 2016."

  • CBO said that it anticipated that the number of enrollees in the public plan would be substantially smaller than predicted by the Lewin Group, "even if we assumed that all employers would have that option." CBO noted that analysts at the Lewin Group recently estimated that if all employers were given access to the insurance exchanges, more than 100 million people would end up enrolling in the public plan. CBO projected that only about 10 11 million individuals in the public option by 2019.


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