Monday, September 12, 2016

Are Millions of Americans Leaving Employer Coverage to Join Obamacare?

In defending the relatively small enrollment of health insurance Exchanges to date, the Obama Administration has claimed that fewer employers have dropped health insurance coverage than expected. However, results from a recent survey indicate that approximately 6.8 million enrollees in Obamacare coverage have come directly from the employer market—suggesting the phenomenon may be more widespread than originally thought.

The survey, from the Commonwealth Fund, found that a majority of individuals with Medicaid coverage (62%), and a plurality of individuals with Exchange coverage (45%), lacked health insurance prior to obtaining their new coverage. But sizable percentages of individuals with Exchange coverage (34%) and Medicaid insurance (20%) said they had been enrolled in employer-provided health insurance immediately prior to obtaining their current Obamacare-related plan.

The responses suggest the presence of crowd-out, in which government-subsidized insurance takes the place of privately-sponsored coverage. Prior studies suggest that, in some cases, crowd-out can reach as high 60%. While not approaching those levels, the survey data do demonstrate that public programs have attracted many individuals with employer coverage.

Extrapolating the Commonwealth data to existing enrollment figures suggests that Obamacare programs may have prompted 6.8 million enrollees to drop their employer coverage. That number includes 34% of the 11.1 million Exchange enrollees as of March 31 (3.8 million), plus 20% of the approximately 15 million increase in Medicaid enrollment since Obamacare’s first open enrollment period in 2014 (3.0 million).

The publicly released data associated with the Commonwealth do not provide income information for the individuals who dropped employer coverage to join an Obamacare plan, or the reasons for their change in coverage. However, other studies suggest that Exchanges have appealed primarily, if not exclusively, to those individuals with low incomes eligible for the greatest subsidies.

News articles have generally focused on the lack of disruption to employer coverage caused by the Obamacare rollout. It remains unclear whether those surveyed by Commonwealth voluntarily relinquished employer coverage (in which case they should not have received Exchange insurance subsidies), saw themselves “dumped” into the Exchange by an employer dropping their plan, or a mix of the two. But the survey data suggest policy-makers need examine the crowd-out phenomenon more closely—not just for those facing potential dislocations in coverage, but for taxpayers footing the bill for insurance subsidies.