Dropping health coverage doesn't make sense for employers

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They question of whether employers will continue to provide health insurance to their employees after the reform law is fully implemented rages on with the release of a new study on the matter.

The latest attempt to predict employers' health coverage comes from a Robert Wood Johnson Foundation-sponsored study that finds it's not in most employers' business interests to stop providing insurance. The study examined all the factors that employers with more than 50 workers will weigh in deciding whether to continue providing coverage or pay a new penalty and allow their workers to purchase coverage from health insurance exchanges, reports NPR's Shots blog.

The conclusion? It doesn't make economic sense to stop offering health coverage--except for businesses primarily employing low-paid workers earning under 250 percent of poverty. That's because employers offer insurance so they can compete for labor, and there's no reason that competitive pressure will disappear after the reform law is effective, according to Bloomberg BusinessWeek.

The study predicts that "employers who drop workers' coverage but fail to increase employees' wages in order to maintain their overall compensation, will inevitably lose these employees to competitors." Those employers would then end up paying penalties for not offering coverage while also providing other benefits, increased wages for example, to remain competitive, essentially rendering dropped coverage financially unattractive, NJBIZ reports.

"The mistake is to think ... they can drop coverage, let the employees benefit from the subsidies, get those subsidies--and not hike their wages but pocket the money," said Judy Feder, a professor of public policy at Georgetown University who worked on the study. "If they do that, somebody is going to pick up their low-wage workers, because they are underpaying them."

To learn more:
- read the Robert Wood Johnson Foundation report
- read the NPR's Shots blog post
- see the NJBIZ article
- check out the Bloomberg Businessweek article

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