Report claims 90% of employers could shift workers to exchanges by 2020

S&P Capital IQ expert: Tax incentives are 'not enough'

About 90% of the workforce at Standard & Poor's 500 companies will be shifted out of job-based health coverage by 2020, which could be the start of a trend among smaller companies, according to a report released Thursday by S&P Capital IQ.

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Report details

For the report, S&P Capital IQ analyzed S&P's 500 companies, which employ around 138 million people, or about 20% of the U.S. workforce for companies with more than 50 employees. S&P's 500 is considered to be largely representative of the U.S. economy.

Researchers estimated that if the largest U.S. companies shifted their employees from employer-sponsored insurance plans to health plans offered through the Affordable Care Act's (ACA) federal or state exchanges, such companies could save about $700 billion between 2016 and 2025.

If all companies with more than 50 employees made that switch, the estimated savings total could reach $3.25 trillion. 

In addition, the report claimed that:

  • 10% of S&P 500 employees will switch coverage by 2016;
  • 30% of S&P 500 employees will switch coverage by 2017;
  • 70% of S&P 500 employees will switch coverage by 2019; and
  • 90% of S&P 500 employees will switch coverage by 2020.

The report noted that once a "few notable companies" beginning transitioning their employees to exchange coverage, "it's likely that a substantial number of firms could quickly follow suit."

Low- and middle-income employees are most likely to be shifted toward coverage under the ACA's exchanges—such a shift could increase company's profitability and also make job-based health insurance more of a recruitment and hiring tool, the report noted.

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Comments and perspective

S&P Capital IQ Managing Director Michael Thompson says, "We still expect some companies to hold on to their health care plans. ... But we think that the tax incentives for employer-driven insurance are not enough to offset the incentives for companies to transition people over to exchanges and have them be more autonomous around management of their own health care."

"Whether the current version of the ACA remains intact or is amended, the burden of acquiring or providing health benefits is sure to shift more from the employer toward the individual or employee, with varying degrees of support from the government," the report noted.

However, not everyone is convinced that there will be a major shift away from employer-sponsored insurance—or that it will happen so quickly.

"For most firms, there isn’t a net gain to dropping coverage for active workers," according to David Cutler, a Harvard economist who was an advisor to the White House during the ACA negotiations. "The subsidies are more than offset by the higher taxes workers will pay" (Pugh, McClatchy/Sacramento Bee, 5/1; Irwin, "The Upshot," New York Times, 5/1).

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