When the Affordable Care Act (ACA) was passed in 2010, one of the main concerns — which was often used to argue against passage of the health care reform bill — was that Americans would stop enrolling in employer-based plans and instead jump to the government-controlled ACA marketplace.
More than ten years later, that prediction has not come true. In fact, companies and employees alike seem to see health benefits as an important feature of employment, with companies often competing to offer the best health plans at the most affordable price. A new report, “What Employers Say About the Future of Employer-Sponsored Health Insurance,” found that employers see health benefits as a valuable recruitment and retention tool and have worked hard to keep such benefits as an expected part of the relationship between employer and employee. As a result, more than 70% of working Americans get their health insurance through their employer.
The new report, released by the Employee Benefit Research Institute (EBRI) and supported by the Commonwealth Fund, a private foundation that supports independent research on health care, looked at the impact of the ACA on employment based benefits, and also examined other government solutions, such as individual coverage health reimbursement accounts (ICHRAs), which were created in 2019 to allow employees to purchase health plans directly from the ACA from accounts funded by employers. The researcher found that by and large, ICHRAs had not caught on with workers in the U.S.
“The ACA, private exchanges, ICHRA plans and the rising costs of providing health benefits were all threats that analysts and pundits alike had predicted would erode the relationship between employment and health benefits,” says Paul Fronstin, director of Health Benefits Research at EBRI. “Future policy and economic developments may pose yet another threat to the bond between employment and health benefits. This includes the permanent extension of ACA subsidies, implementation of a public option, and continued health care cost increases that outpace inflation. Yet, the will for employers to provide health benefits to their workers remains strong. It seems unlikely that these forces would cause companies to abandon employer-sponsored insurance.”
A paternalistic benefit
The new study was conducted by interviewing 26 benefits executives, allowing the participants to remain anonymous so they could speak freely. All interviewees were asked the same questions but could elaborate on their answers. The participants represented a wide range of industries and their companies in all covered more than 1.2 million lives, with $6.5 billion in benefits.
The results gave an interesting insight into the relationship between companies and their workers when it comes to health benefits. The study found that many companies feel paternalistic toward employees, with the perception that their workers look to them to provide essential benefits. “[Employees] trust their employer, and that the employer will give them the tools and knowledge they need to navigate their care,” says a benefits executive at a large financial services firm. The complexity of health insurance was also seen as something that played into employers’ hands, with one respondent saying, “Every survey we’ve done says that our workers want more choice, but when that choice comes, they want us to choose for them.”
The researchers found that as the ACA took hold, concepts such as private exchanges were seen as simply too complicated and risky for Americans to take on. Companies were wary that employees might try such arrangements only to come back to company plans when private exchanges proved too complicated or inadequate. So, there was a general effort to maintain good benefits as a way to keep employees closer to home.
ICHRAs, created in 2019, gave employees the ability to purchase ACA health plans using pretax dollars from an account funded by their employer. But like the earlier idea of private exchanges, the arrangement has not found traction — indeed, many benefits managers had little knowledge of the new model. “Many interviewees indicated that they were not familiar with ICHRAs,” the report says. “When informed about them, interviewees were skeptical that their companies would take this approach in the near future.”
Questions remain over cost, consolidation
Rising health care costs are still a concern for employers, although many of the executives interviewed seemed to think cost increases were not an insurmountable problem.
The high cost of specialty drugs did pose a considerable problem, the interviews found. “If there’s a place where companies feel comfortable with government stepping in, it’s specialty drugs,” says one executive quoted in the report. Other areas of concern were opaque practices from pharmacy benefit managers and health care provider consolidation.
Overall, the report found that current labor conditions favored maintaining the status quo with employer-provided health benefits. “Broadly, companies continue to view their health benefits as a recruitment and retention tool; cutting these benefits would hamper their efforts to cultivate a strong workforce,” the report says.