http://worldcat.org/entity/work/id/981171180

The importance of the meaning and measurement of "affordable" in the Affordable Care Act

This working paper highlights the practical importance of two critical but under-explored assumptions behind existing estimates of the Affordable Care Act (ACA)'s potential impact on the mix of employees and families who may have employer-sponsored health insurance (ESI) in the future or may receive subsidies in the new health insurance exchanges. The first assumption is whether ACA's affordable coverage rule will be interpreted to mean that employers must provide affordable single coverage or that they must provide affordable family coverage policies to workers with families to avoid paying a fine. The second assumption is how much employers and employees will cooperatively agree in the future to designing new compensation contracts to take advantage of the way "affordability" is determined. We show that depending on these assumptions, the ACA could lead to far more lower to moderate income families gaining access to affordable coverage through exchanges or, conversely, to far fewer of these families being covered by ESI, even if no employers drop their health insurance plans as a result of the new law. Using our stylized models, we find at one extreme that the share of private sector workers covered by ESI would fall by as much as 12.7 percentage points, relative to a case of full compliance with the law, if the ACA affordability coverage rule is interpreted to apply to family coverage and employees directly pay 100 percent of the cost of the ESI in premiums, with compensating higher wages making them no worse off. At the other extreme, we find no changes in the share of private sector workers covered by ESI along this margin if employee contribution shares do not change in the future and affordability is interpreted to refer to single coverage. What constitutes a realistic point between these two extremes depends on exactly how the affordability coverage rule will be interpreted and the degree that employers and employees will actually be able to make these adjustments because of labor market rigidities. This working paper's contribution is to point out the importance of these hitherto unexplored factors for future consideration in research that uses more sophisticated micro simulation models. In our stylized model, most of the effect of the movement onto the subsidized exchanges occurs when employees directly pay less than 50 percent of the ESI family premium. We conclude by discussing the limitations of stylized calculations relative to full simulation models, and directions for future research.

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