New flash: 46% of working uninsured are in large firms subject to employer mandate

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Progressives who champion Obamacare, such as Families USA's Ron Pollack, have assured us that the one-year delay in the employer mandate is "much ado about fairly little" given that more than 94% of employers with 50 or more workers already offer health insurance benefits.  Similarly, over at the New York Times' Economix, Jared Bernstein offers this net assessment of the one-year delay "Hard to see it having much impact at all" since the "vast majority of employers with at least 50 full-time workers - about 95 percent - already offer coverage to the workers." The Washington Post's Ruth Marcus opines with the nearly-identical logic. Even academics share this misconception. "It is much ado about very little," said Gerard Anderson, a professor at Johns Hopkins University. "So many people in firms larger than 50 already had health coverage."

These claims betray a fundamental misunderstanding of the characteristics of uninsured workers in America. The truth is nearly half of the nation's nearly 28 million uninsured workers are employed by the very firms mandated to provide health coverage.

Sure, it's true that according to the latest Kaiser Employer Health Benefits Survey (2012), 94% of employers with 50-199 workers and 98% of firms with 200 or more workers already offer health benefits.  These are consistent with the federal government's Medical Expenditure Survey (MEPS) showing that 96.8% of large firms (defined as workers with 50 or more employees) offer health benefits.

But that's not equivalent to saying that the same fraction of workers at such firms have health coverage. For example, as of March 2012, the Census Bureau figures show that 13.7% of workers age 18-64 employed in firms with 1,000 or more workers are uninsured even though the MEPS data show that 99.5% of such employers offer health benefits. Thus, when we examine the distribution of the nation's 27.9 million uninsured workers age 18-64 by firm size, it turns out that 46.1% are employed at large firms.[1]

 Why the disconnect? First, not every worker at a firm offering benefits is eligible for coverage. For example, part-time, temporary and seasonal workers quite often are not eligible for fringe benefits. Or a worker may be eligible for benefits but be stuck in a waiting period before their benefits actually can begin. Thus, the Kaiser survey shows that even though 98% of firms with 200 or more workers offer health benefits, only 76% of employees in such firms are eligible for the benefit.

Likewise, there is a distinction between being a firm's offering a benefit and an employee's accepting it (the so-called "take-up rate"). Again, the Kaiser survey figures are quite revealing. In firms with 200 or more workers, only 82% of eligible workers actually enroll in their employer health benefits plan. This does not imply that all such workers end up being uninsured. They may decline their own employer's coverage because they can get better or less expensive coverage elsewhere typically as a spouse or dependent on some other family worker's health insurance plan.  An employer survey does not reveal what happens to workers who turn down coverage, which is why we have to rely on population surveys such as the annual Current Population Survey conducted by Census Bureau to account for how many such workers end up in the uninsured column.

Readers can object that such uninsured workers will not be subject to the employer mandate, but this is where things get tricky. Most firms would not view workers employed for only 30 hours a week to be full-time workers eligible for health benefits, yet Obamacare does. Likewise, Obamacare caps waiting periods at 90 days even though 7% of covered workers in firms with 200 or more employers currently require waiting periods of 4 months or more. Indeed, figuring out exactly which workers are eligible for mandatory health benefits under Obamacare was precisely one of the complications that led to delaying the start date of the mandate.

My central point is this: the delay of the employer mandate is a far bigger deal than champions of Obamacare would have you believe. Not only will it affect millions more workers than implied by the 95% coverage figure, but it also will greatly complicate the task faced by exchanges which have the responsibility of figuring out who is eligible for subsidies. Without employers reporting on who is eligible for their health benefits or its actuarial value, how will an exchange know whether low-wage worker X employed by company Y is eligible to receive subsidized coverage? Will they rely on an honor system whereby employees self-attest their own eligibility? Given that the exchange subsidies are measured in thousands of dollars and the rampant fraud we already see in programs such as SNAP (formerly known as  Food Stamps) and Medicaid, good luck with that. Will they have to set up a "pay-and-chase" system using random audits to track down and penalize those who have been less than honest? And leave fraud aside entirely: how will exchanges deal with many millions of workers who may themselves have no idea whether they qualify for subsidized coverage?

In short, the delay of the employer mandate did not necessarily avert a train wreck: it may actually contribute to the slow-motion train wreck now in progress. Everyone is now waiting for another shoe to drop: delaying the entire law for at least one year may well turn out to be the most sensible course of action.

 

Footnotes

[1] This estimate and the accompanying figure are derived from the latest annual compilation of Current Population Survey figures released by the Employee Benefits Research Institute (Figure 12).

 

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Christopher J.
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