HOW WILL THE AFFORDABLE CARE ACT CHANGE EMPLOYERS’ INCENTIVES TO OFFER INSURANCE?

by

Jean M. Abraham, Ph.D. University of Minnesota

Roger Feldman, Ph.D. University of Minnesota

Peter Graven, M.S. Oregon Health and Science University

CES-WP-14-02 January, 2014

The research program of the Center for Economic Studies (CES) produces a wide range of economic analyses to improve the statistical programs of the U.S. Census Bureau. Many of these analyses take the form of CES research papers. The papers have not undergone the review accorded Census Bureau publications and no endorsement should be inferred. Any opinions and conclusions expressed herein are those of the author(s) and do not necessarily represent the views of the U.S. Census Bureau. All results have been reviewed to ensure that no confidential information is disclosed. Republication in whole or part must be cleared with the authors. To obtain information about the series, see www.census.gov/ces or contact Fariha Kamal, Editor, Discussion Papers, U.S. Census Bureau, Center for Economic Studies 2K132B, 4600 Silver Hill Road, Washington, DC 20233, CES.Papers.List@census.gov.

Abstract

This study investigates how changes in the economic incentives created by the Affordable Care Act (ACA) will affect the probability that private‐sector U.S. employers will offer health insurance. Using the Medical Expenditure Panel Survey Insurance Component for 2008‐2010, we predict employers’ responses to key ACA provisions. Our simulations predict that overall demand for insurance will rise, driven by workers’ desire to avoid the individual mandate penalty and the availability of premium tax credits in exchanges. Our analyses also suggest that the average probability of an establishment offering insurance will decline from .83 to .66 with ACA implementation, although there is considerable variation by firm size, industry and union status. Keyword: health insurance, Affordable Care Act; premium tax credits; employer behavior JEL Classification: I1; I13; J3 i

i Corresponding author: Division of Health Policy and Management, School of Public Health, 420 Delaware Street SE, MMC 729; Minneapolis, MN 55455. Phone: 612‐625‐4375. Email: abrah042@umn.edu. We thank the National Institute for Health Care Reform for financial support. Any opinions and conclusions expressed herein are those of the authors and do not necessarily represent the views of the U.S. Census Bureau. All results have been reviewed to ensure that no confidential information is disclosed.

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I. Introduction

In2011,58%ofthenon‐elderlyU.S.populationobtainedhealthinsurancethrough

anemployer(DeNavas‐Walt,Proctor,andSmith,2012).Thepreferentialtaxtreatmentof

premiumsforemployer‐sponsoredinsurance(ESI)andeconomiesofscalecreatestrong

incentivesthatencourageprovisionofhealthinsurancethroughtheworkplacerelativeto

theindividualmarket.

SeveralprovisionsinthePatientProtectionandAffordableCareAct(P.L.111‐148,

hence“ACA”)willaffectemployers’incentivestoofferESI.In2014,employersthatdonot

offercoveragewillpayanannualpenaltyof$2,000perfull‐timeemployee(exemptingthe

first30employees)ifanyfull‐timeemployeebuyssubsidizedinsuranceinanewhealth

insuranceexchange.

AtthesametimethattheACAwillpenalizelargeremployersfornotofferinghealth

insurance,itwillprovideanewoptionforworkerstobuyhealthinsuranceoutsidetheir

placeofemployment.Withtheopeningofhealthinsuranceexchangesin2014,theACA

willprovidetaxcreditstoindividualswithfamilyincomesbetween133%and400%ofthe

federalpovertylevel(FPL)whodonothaveaccesstoanofferofESItopurchaseexchange‐

basedcoverage.Thesepremiumassistancecreditswillreducethecostofhealthinsurance

to3percentofincomeforthoseat133%FPL2,phasingoutto9.5percentofincomeat300‐

400%FPL.

OneofthemostcontroversialACAprovisionsalsogoesintoeffectin2014,when

mostindividualsintheUnitedStateswillberequiredtohaveinsuranceorpayapenalty.

                                                            2The2013federalpovertylevel(FPL)is$11,490foroneperson,increasingto$39,630forafamilyofeight.ModifiedAdjustedGrossIncome(MAGI)willbeusedtodeterminepremiumsubsidies,resultinginaneffectiverateof138%FPLaftera5%offset. 

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Atfullimplementationin2016,thepenaltyforasinglepersonwillbethegreaterof$695

(uptothreetimesthatamountforafamily)or2.5%ofhouseholdincome.Althoughthe

penaltyisnotlargerelativetothefullpriceofaninsurancepolicy,thisrequirementis

expectedtoincreasedemandforcoveragebythosecurrentlylackinginsurance.Taken

together,theemployersharedresponsibilityrequirement,theintroductionofinsurance

exchangeswithpremiumassistancecreditsforlower‐incomeindividualswithoutaccessto

ESI,andtheindividualmandatehavethepotentialtoinfluenceemployers’incentivesto

offerhealthinsurance.

Inadditiontoprovisionsthatdirectlyaffectemployers,otherACAprovisions–

regulationofinsurers’medicallossratiosandpremiums,andarequirementtooffer

“essential”benefits–areexpectedtoaffectthefunctioningofhealthinsurancemarkets.

Thesepolicieshavethepotentialtochangethetypesofinsuranceproductssold,the

premiumscharged,andthedegreeofmarketcompetition.

WeinvestigatehowthesechangesineconomicincentivescreatedbytheACAwill

affecttheprobabilitythatprivate‐sectorU.S.employerswillofferESI.UsingtheMedical

ExpenditurePanelSurvey(MEPS)for2008,2009,and2010,wepredictemployers’

responsestokeyACAprovisionsinfoursteps.First,weestimateabinarylogitmodelto

identifythefactorsthatinfluenceanemployer’sdecisiontoofferESI.Second,wepredict

howkeyACAprovisionsthatwillbeimplementedin2014altertheeconomicincentivesof

workerstochooseESIversusan“outsidegood”andanindividualexchangepolicyversus

the“outsidegood.”Third,usingthemodelestimates,wepredicttherelativeprobabilities

ofeachchoice.Finally,wesolvefortheunconditionalprobabilitiesofanESIoffer,the

individualexchangeoption,andtheoutsidegood.

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Oursimulationssuggestthattheaverageprobabilityofanestablishmentoffering

ESIwilldeclinefrom.83to.66withACAimplementation,althoughthereisconsiderable

variationbyfirmsize,industry,andunionstatus.Moreover,ourresultsshowthatthe

introductionofanewoption–individualexchangecoveragewithincome‐basedpremium

assistancecredits–willbeattractivetoahighpercentageofworkerswhodonothavean

ESIofferfromtheiremployer.

Section2summarizesthedata.Section3describesourmethodsforconductingthe

simulation.Section4presentsresultsandstudylimitations.Section5discussesthe

findingsandimplicationsforpolicy.

II. Data

TheprimarydatasourceistheMedicalExpenditurePanelSurvey‐Insurance

Component(MEPS‐IC)ListSamplefor2008,2009,and2010.3TheMEPS‐ICisanationally‐

representative,establishment‐levelsurveyofU.S.employersthatcollectsdetailed

informationontheprovisionofhealthinsurance.Thesurveyincludesquestionsaboutan

employer´sworkforceandcharacteristicsoftheestablishment.Employersthatoffer

insuranceprovideinformationabouttheplansoffered,includingthetotalpremium,

employerandemployeecontributions,enrollmentbycoveragetype(single,employeeplus

one,andfamily),andSection125status.

Anemployer’sdecisiontoofferhealthinsurancedependsonhowmuchitsworkers

valuethatcoveragerelativetowages.Thisvaluelikelyvariesbasedonthecompositionof

anestablishment´sworkforce,includingworkers’wages,familyincomes,familysize,

                                                            3BecausetheMEPS‐ICisnotavailabletothepublic,weobtainedapprovaltousethedatafromtheU.S.BureauoftheCensus.AllanalyseswereconductedintheMinnesotaCensusResearchDataCenter. 

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demographics,andfederalandstatetaxrates,giventhetax‐exemptstatusofpremiums.4

WhiletheMEPS‐ICcontainssomeinformationaboutworkers’attributes,itdoesnothave

thelevelofdetailnecessarytomeasurethepriceofESI.Thus,weaugmentedtheMEPS‐IC

withinformationonworkers’familiesfromtheMEPS‐HouseholdComponent(HC),a

nationallyrepresentativesampleofthenon‐institutionalizedU.S.population,usinga

statisticalmatchingmethod(describedbelow)toimputethetaxpriceandadditional

characteristicstoworkersinestablishments.

Becausetheemployer’sdecisiontoofferESImayalsodependonlabormarket

conditions,wemergedinformationontheestablishmentsizedistributionand

unemploymentrateforthecountyinwhichtheestablishmentislocatedfromtheU.S.

BureauoftheCensusCountyBusinessPatterns(2008‐2009)andtheU.S.BureauofLabor

Statistics(2008‐2010).Werestrictedourattentiontoprivate‐sectorestablishments.Table

1providesdescriptivestatisticsofestablishmentsthatofferanddonotofferinsurance.

III. Methods

A. EstimatingtheEmployerOfferModel

Inourconceptualframework,anemployeroffersacombinationofwagesand

healthinsurancethatminimizesitslaborcosts,subjecttomaintainingitsemployees’utility

atalevelthatkeepstheestablishmentcompetitiveinthelabormarket(Feldmanand

Dowd,1987;DowdandFeldman,1987).Employeeshavepreferencesregardingthe

combinationofwagesandhealthinsurancethatcomprisetheirtotalcompensation.Given

thetax‐exemptstatusofemployer‐paidpremiums(ortotalpremiumsforSection125

                                                            4Alltaxrates(federal,state,OASDI,andmarginalpayrolltaxratesforMedicareHI)wereestimatedusingTAXSIM(FeenbergandCoutts,1993). 

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plans),workerswhopayhigherfederalandstatemarginaltaxratesfacealower“price”for

healthinsurancerelativetowagescomparedwithworkerswithlowerincomesand

marginaltaxrates.Thus,employerswithworkerswhose“taxprice”ofinsuranceislower

shouldbemorelikelytoofferhealthinsurance,allelseconstant.

Otherworkforceattributesmayinfluenceemployees’preferencesforhealth

insurance,includingworkers’familyincomesandhealthstatus.Weassumethatan

employercanobserveitsworkers’preferences(orvariablesthatareproxiesforthem)and

theemployercanaggregatethosepreferenceswhenitdecidestoallocatetotal

compensationintowagesandinsurance.Themostcommonlyusedaggregatemeasureis

thepreferencesoftheaverageworker(GruberandLettau,2004).

Employersmustalsoconsiderthetransactioncostsofofferinghealthinsurance

whenselectingtheoptimalcombinationofwagesandinsurance.Sincetheadministrative

costsofESI(e.g.,stafftoobtainpremiumquotesandcoordinateopenenrollment)arelikely

tobefixedorquasi‐fixed,largeremployerscanspreadthosecostsovermoreworkers

relativetosmallfirms.Thusweexpectlargeremployerstobemorelikelytooffer

insurance.Otherfactorsthatvarygeographically,includingstateregulationsofhealth

insurancemarkets,mayaffecttheadministrativecostsofESI.

Finally,anemployermustsettotalcompensationatalevelthatkeepsthe

establishmentcompetitiveinthelabormarket.Weexpectseveralfactorstobecorrelated

withlocallabormarketconditionsandcompensationlevels,suchasfirmsize,industry,the

employersizedistributioninthelocalmarket,andmacroeconomicconditions.

Theoffermodeliswrittenasfollows:

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(1) ititit

itititititit

TIMESTATE

LABORESTABWORKTPOfferNotUESIU

65

43210)(ln)(ln

Thedependentvariableisthedifferenceinthelog‐utilitiesofofferingESIandan“outside

good”ofnotofferingESI.IftheemployerdoesnotofferESI,thisdoesnotnecessarilymean

thattheworkerswillbeuninsured.TheymayhaveaccesstoESIthroughaspouseorthey

canbuyinsuranceintheindividualmarket.5However,asnotedabove,theindividual

marketlackseconomiesofscaleanddoesnotofferapremiumtaxsubsidy6,sofewworkers

takeupthatoption(MarquisandLong,1995).Byconvention,thelog‐utilityoftheoutside

goodisnormalizedtozero.

Neitheroftheutilitiesinequation(1)isobserved.Rather,weobservevariablesthat

influencetheutilityofofferingESI,andwepostulatethattheemployerwillofferESIif:

(2) 0)(ln)(ln itit OfferNotUESIU

Ifweassumetheerrortermin(1)hasalogisticdistribution,wecanreplacethe

unobserveddependentvariablewithanindicatorthatequals1ifthefirmoffersESIand

zeroifitdoesnot.Thenweestimatethecoefficients(β)in(1)andexpresstheprobability

thatthefirmoffersESIas:

(3) Xb

Xb

itESIexp1

exp)Pr(

wherebstandsfortheparameterestimatesandXrepresentsthevariableslistedin

equation(1).

                                                            5 A small proportion of workers may also qualify for Medicaid or state-based public insurance programs.  6 Self-employed individuals who have a net profit for the year may be able to deduct the premiums paid for health insurance for themselves and qualified dependents from their taxable income.

 

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Ourkeyexplanatoryvariableisthetaxprice(TP)–thepriceofadollarofhealth

insurancerelativetoadollarofwageincome.TPislessthan1.0giventhetax‐exempt

statusofemployer‐paidESIpremiums(totalpremiumsforemployerswithSection125

plans).Itvarieswithinestablishmentsgivenvariationinworkers’familyincomesand

acrossestablishmentsgivendifferentincomedistributions.Ouridentificationstrategy

reliesonobserveddifferencesintheprogressivityofmarginaltaxratesacrossstatesfrom

2008to2010.7

WhiletheMEPS‐IChasbasicinformationaboutthewagedistributionofworkersin

eachestablishment,itdoesnothavedetailedinformationaboutworkers’familyincomes,

marginaltaxrates,ortaxpricesofinsurance.Belowwedescribeourapproachfor

imputingthisinformation.

UsingtheMEPS‐HCfor2007and2008,weselectedworkersinprivate‐sector

establishments.Wecomputedtotalfamilyincome,definingthefamilyusingtheHealth

InsuranceEligibilityUnit(HIEU8)identifierontheMEPS‐HC.Next,weusedNBER’s

TAXSIMsoftwareandallavailabletax‐relatedinputvaluesforeachworkertoestimate

workers’marginalfederalandstateincometaxrates,OASDI,andMedicareHospital

                                                            7Sevenstatesdidnothavestateincometaxesin2008.Amongstateswithincometaxes,thereiswidevariationinthenumberofbracketsandrates.Forexample,themaximumrateinArizonawas4.54percentin2008,incontrasttoVermont’srateof9.5percent.  8TheHIEUincludesallmembersofthefamilywhowouldtypicallybecoveredunderaprivateinsurancefamilyplan:adults,spouses,andunmarriednatural/adoptivechildrenage18andunder(orage24andunderwhoarefull‐timestudents). 

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Insurancetaxes.9WethencomputedataxpriceforeachworkerintheMEPS‐HCusingthe

followingformula:

)1(

)1()4(

mcss

mcsssfTP

wherefistheworker’sfederalincomemarginaltaxrate,sisthemarginalstateincometax

rate,ssisthemarginalpayrolltaxratefortheOASDIprogram,andmcisthemarginal

payrolltaxratefortheMedicareHospitalInsuranceprogram.TheOASDIandMedicareHI

taxeswereimputedas7.65%ofpayroll.

WeestimatedaregressionofMEPS‐HCworkers’taxpricesasafunctionofwage‐

coveragetypeinteractions,establishmentsizeoftheworker,employmentatamulti‐

locationfirm,industry,state,andthefamilysizeoftheworker(alsopredictedusinga

regression).AlloftheexplanatoryvariablesinthatregressionalsoexistintheMEPS‐IC.

WethenpredictedtaxpricesfromtheMEPS‐HCtoeachestablishmentintheMEPS‐IC.We

repeatedthismethodtopredictworkers’familyincomeintheMEPS‐ICestablishments.10

Inadditiontothetaxprice,weconsideredseveralotherworkforceattributes:the

percentageofpart‐timeworkers,thewage,ageandsexdistributionsofworkersinthe

establishment,andthepresenceofunionizedworkersintheestablishment.Ourmodel

alsocontrolsforestablishmentsize,singleormultiplelocations,andindicatorsforone‐

digitindustrycategories,businesstenure,andnon‐profitownership.11

                                                            9SincetheMEPS‐HCdoesnotincludestateidentifiersandinternetconnectionsarenotpermittedinCensusRDCs,werepeatedthissimulationforeachworkerforeachstate.Wethenselectedthestate‐specificobservationafterbringingthefileintotheRDC. 10SeeAbraham,Graven,andFeldman(2013)foradditionalinformationontheconstructionandpredictionofthetaxprice. 

11WeusedmultipleimputationandSTATA’s“nearest‐neighbor”approachtoaddressitemnon‐responseissuesforsomeoftheworkforceandestablishmentmeasures.Thismethoduseslinearregressionstopredictvaluesfortheoutcomesofinterestbasedonasetofexplanatoryvariables.Weusedinformationonfirmsize,

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Locallabormarketconditionsarecapturedbytheunemploymentrateforthe

countyinwhichtheestablishmentislocatedandthepercentageofestablishmentsinthe

countywithmorethan50workers.Finally,weincludestatefixedeffectstocontrolfor

state‐specific,time‐invariantfactorsthatmayinfluenceemployeroffering.

TheemployerofferingmodelwasestimatedwithbinarylogitandSTATA12.0/SE

statisticalsoftware.Allestimateswereweightedtoreflectthenumberofemployeesin

private‐sectorU.S.establishments.TheresultsarereportedinTable2.

B. MeasuringChangesinEconomicIncentivesin2014

In2014,employerswillhavethesamechoicesthatwerepresentbeforetheACA:to

offerESIornottoofferESI.IfanemployerdoesnotofferESI,workersmayseekan

alternativesourceofcoverageorremainuninsured.Butin2014,workerswillhaveanew

option–topurchaseindividualcoverageinnewly‐createdexchangeswithincome‐based

premiumsubsidies.Inotherwords,therewillbethreeoptions:ESI,individualexchange

coverage,andtheoutsidegood.12

BecausetheACAwillchangetheeconomicattractivenessofparticularsourcesof

healthinsuranceaswellasindividuals’overallincentivetohaveinsurance,itisimportant

toconsidertheincentivesaffectingallthreechoiceswhenpredictingemployerbehavior.

Althoughweconsiderallthreeoptions,weareconstrainedbyhavingonlyoneoffer

equation.Thus,weassumethatthesamecoefficientsandunmeasuredfactorsinthe

                                                                                                                                                                                                industryandstateasexplanatoryvariables.Valuesareimputedforobservationsmissingworkforceandestablishmentinformationfromestablishmentsthataresimilaronthesedimensionstomaintainacompletesamplefortheanalysis.

12 In 2014, the “outside good” will include coverage through a spouse, public insurance for those who are eligible, and the purchase of individual insurance outside the exchange. There is still much uncertainty regarding the long-term viability of an “outside” individual insurance market, since many ACA regulations apply both inside and outside exchanges. Subsidies, however, may be obtained only in the exchanges.  

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model’sconstanttermthataffectthechoiceofofferingESIversustheoutsidegoodin

equation(1)canbeappliedtothechoiceoftheindividualexchangecoverageversusthe

outsidegood.Thisassumptionisreasonableiftheargumentsintheutilityfunction(e.g.,

taxprice,income,anddemographics)andtheireffectsonworkers’utilityarethesamefor

bothsourcesofinsurance.Wediscussthisassumptionfurtherinthelimitationssection.

Whileweassumethecoefficientsarethesame,theESIandindividualexchange

optionswillhavedifferenttaxprices.BelowwedescribehoweachoftheACAprovisions

weconsidermayaffectthetaxpriceofinsurance.Wemodelthesumoftheseeffectsasa

singlechangeinthetaxprice–oneforESIandonefortheindividualexchangepolicy.We

alsoconsiderotheranticipatedchangestoinsurancemarkets(e.g.,differencesin

administrativeloadingfeesbetweenESIandexchanges).

IndividualMandate:TheACArequiresmostindividualstoobtainqualifiedcoverage

orpayapenalty.Whenfullyimplemented,theannualpenaltyforasinglepersonwillbe

thegreaterof$695(oruptothreetimesthatamountforafamily($2,085))or2.5%of

familyincome.TheemployeescanescapethispenaltybychoosingeitherESIorthe

individualexchangeoption.Wecalculatedtheaveragepenaltyforeachestablishment.

ValueoftheESITaxSubsidy:Undertheexistingtaxcodetheemployer‐paidportion

oftheESIpremium(orthetotalpremiumforfirmswithSection125status)isexemptfrom

incomeandpayrolltaxes.ThisprovisionisnotaffectedbytheACA.Weestimatedthe

valueofthetaxsubsidybyestimatingpredictivemodelsofESIpremiumsandthe

employer‐paidportionofpremiums.Next,weinflatedallamountsto2014dollarsand

thenestimatedthevalueofthetaxsubsidybymultiplyingthepredictedtax‐exempt

premiumamountby(1‐taxprice)asdefinedpreviously.

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EmployerSharedResponsibilityRequirement:Ifanemployerwithatleast50full‐

timeequivalentworkersdoesnotoffercoveragein2014andanyfull‐timeemployee

receivesapremiumtaxcreditforpurchasinginsuranceinanexchange,theemployerwill

payanannualpenaltyof$2,000timesthenumberoffull‐timeemployeesless30.Weused

thefollowingformulatoestimatetheestablishment’spenalty:

(5) Penalty=(numberofthefull‐timeworkersatfirm–30)*$2,000*(numberofemployeesinestablishment/numberofemployeesinthefirm).

BecausetheMEPS‐ICdoesnotidentifythenumberoffull‐timeworkersatthefirmlevel,we

usedinformationonthenumberofpart‐timeandfull‐timeworkersateachestablishment

andassumedthatthedistributionsatthefirmandestablishmentlevelsaresimilar.

IfanemployerthatcurrentlyoffersESIdropsitin2014,itsworkerswilllosethe

valueoftheESItaxsubsidy.Weassumetheemployermustadjustwagesupwardto

maintainworkers’totalcompensationatitspriorlevel.13Weraisedtheincomesof

workersinestablishmentsthatofferedinsurancebyanamountequaltothetax‐exempt

premiumlesstheemployersharedresponsibilityrequirement(“employerpenalty”)and

dividedby1.0765(sincetheemployerwillhavetopaypayrolltaxesontheincreasein

wages).Weadjustedincomesofworkersinlargerestablishmentsthatdidnothavean

offerdownwardbytheamountoftheemployerpenaltydividedby1.0765.

ValueofExchangeSubsidies:In2014,individualswholackanESIoffercanbuysubsidized

insuranceinexchanges.Thevalueoftheexchangesubsidyequalsthepremiumofa

benchmarkhealthinsuranceplaninagivenstate,lessapercentagebasedonthefamily’s

incomerelativetothefederalpovertylevel(FPL).Thebenchmarkplanisthesecond‐

                                                            13Weassumetheadjustmentwillbethroughwagesonly,butemployerscouldadjustothertypesofcompensation,suchasmakingadditionalcontributionstoretirementplans. 

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lowestcost“silverplan”whichhasa70percentactuarialvalue(AV).TheCongressional

BudgetOfficehasestimatedthatthepremiumofasilverplanwillbe$5,300forsingle

coverageand$15,000forfamilycoveragein2016($4,762and$13,476in2014dollars,

assuming5.5%annualrealgrowth).Whilethereisstillsomeuncertaintyovertheamount

ofthesubsidy,anestimatemaybegeneratedfromoneofthepubliclyavailablesubsidy

calculators.Forexample,usingthesubsidycalculatorontheKaiserFamilyFoundation

website,afamilyoffour(2adultsages35and38withtwochildren)earning$31,750in

2014(133%FPL)wouldpay$635out‐of‐pocketforapolicythatcosts$11,282

(http://kff.org/interactive/subsidy‐calculator/,2013).WeusedtheFPLguidelinesandthe

subsidyschedule,alongwiththeestimatedsilverplanpremiums,tocalculatetheout‐of‐

pocketmaximumandthevalueofthesubsidythataworkerwouldreceivebasedon

his/herfamilyincome.

Weconsidertwootherchangestoinsurancemarketsthatarelikelytobeaffectedby

theACA:changesinadministrativeloadingfeesandproductofferings.

AdministrativeLoadingFees:ThevaluesofESIandtheindividualexchangeoption

maydifferbecauseofdifferencesinloadingfees,definedasthepercentageofexpected

benefitspaidoutforadministrativecostsandprofits.Karaca‐Mandic,Abraham,andPhelps

(2011)foundaloadingfeegradientbyfirmsizefrom37%infirmsoflessthan100

workersto4%infirmswithmorethan10,000workers.Historically,estimatedloading

feesfortheindividualmarkethavebeenquitehigh.Proponentsofinsuranceexchanges

arguethatloadingfeeswillbelowerbecauseoftheeliminationofmedicalunderwriting

andstrongercompetitionamonginsurersresultingfrombetterinformationonpriceand

quality.Additionally,theACAimplementedmedicallossratio(MLR)regulationinJanuary

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2011fortheindividualandfully‐insuredsmallandlargegroupmarkets.TheMLRisthe

percentofpremiumrevenuespaidoutforclinicalbenefits.Theregulationspecifiesa

minimumMLRof80%intheindividualandsmallgroupmarkets(approximatelya20%

loadingfee).Toaccountforthisregulation,weassumeESIloadingfeesof20%forfirms

withfewerthan100workers;15%forthosewith100‐9,999workers;and4%forfirm

sizesof10,000ormore.Basedonindividualmarketinsurers’earlycompliancewiththe

MLRregulation,weassumealoadingfeeof23.5%forindividualexchangecoverage.

SpendingonCoveredServices:IndividualsswitchingfromESItoanindividual

exchangepolicymaychooseasilverplan(with70%actuarialvalue)becausethatplan’s

premiumdeterminestheirsubsidy.Alternatively,theymaypurchasecoveragesimilarto

whattheiremployeroffered.EmpiricalevidencesuggeststhatESIplans,onaverage,have

ahigheractuarialvaluethanplansintheindividualmarket(Gabeletal.2012).We

assumedthatworkerswillpurchasecoveragesimilartoESI.Toaccountforthis,weused

informationonESIpremiumsandourloadingfeeassumptionsforESIandexchange

coveragetoestimatetheexchangepremiumfor“ESI‐like”coverage.

Finally,weaggregatedtheeffectspredictedaboveandexpressedthemaschangesin

thetaxprice:

(6) BaselineESItaxprice=1‐(ESItaxsubsidy/predictedESItotalpremium)

(7) 2014ESItaxprice=1‐((ESItaxsubsidy+employerpenalty+individualmandate)/predictedESItotalpremium)

(8) 2014individualexchangetaxprice=1‐((exchangesubsidy+individualmandate)/exchangepremiumfor“ESI‐like”plan)

Weillustratethesecalculationswithahypotheticalexample.Supposewewantto

quantifytheeconomicincentivesforamedium‐size,self‐insuredemployertoofferESI

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versusthe“outsidegood”in2014.Let’ssupposethepremiumofferedbytheemployeris

$6,000andthatthemarginaltaxratesofworkersresultinanaveragetaxpriceof.697.If

theemployeroffersESI,allemployeeswhoareeligibleforcoveragecanhavea$1,818tax

subsidy($6,000*(1‐.697)),giventhetaxtreatmentofESIpremiums.Also,iftheemployer

offerscoverage,anemployeeavoidsthepenaltythatwouldbepassedontohiminlower

wages($1,394)andtheindividualpenaltyifhegoeswithoutinsurance(assumedtobe

$1,000).14Weneedtoexpresstheseincentivesrelativetothepremium.Inthisstylized

example,thenetcostofanESIpolicy(versustheoutsidegood)is$1,788andthetaxprice

is.298(1‐(($1,818+$1,394+$1,000)/$6,000)).

Wecanalsoconsiderthechoiceofanindividualexchangepolicyversustheoutside

goodin2014.UnlikeESI,thereisnotaxsubsidyforthepremiumpaidbytheworker.Let’s

assumethattheexchangepremiumforanESI‐likeplanis$6,175.Wearrivedatthisvalue

bymultiplyingthepredictedESIpremiumfortheworkerbyafactorequalto((1+exchange

loadingfee)/(1+ESIloadingfee))toestimatehowmuchtheexchangepremiumwouldbe

for“ESI‐like”coverage.Iftheworkerhaslowfamilyincomeanddoesnothaveaccessto

anotherESIofferthroughaspouse,hewillqualifyforapremiumtaxcredit.Forexample,a

singleworkerearningapproximately$23,000peryearorabout200%ofFPLwouldbe

requiredtopayupto6.3%ofhisincometowardthepremium.Ifoneassumesthispolicyis

similartoasilverplan,thenthevalueofthecreditwouldbeabout$3,300.Bypurchasing

coverage,theworkeralsoavoidstheindividualmandatepenalty.Inthiscase,thecostofan

individualexchangepolicyis$1,875($6,175‐($3300+$1,000))andthetaxpriceis.303. 

                                                            14Thewageadjustmentresultingfromtheemployerpenaltyassumesthateachworkerbearsanequalshareofthepenaltyimposedonthefirm.Thesechangesinwagesmaynotoccurinstantlyin2014.Wemodelthelongruneffectsasifthechangeshavefullyoccurred. 

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C. PredictingtheOptionsofESIOffer,IndividualExchange,andOutsideGood

Afteraggregatingtheeffectsdescribedaboveandexpressingthemastaxprices,we

usedthemodelestimatesandthenewESItaxpricetopredicttheprobabilitiesofanESI

offerversustheoutsidegoodin2014.Wethenrepeatedthisstepusingthe2014

individualexchangetaxpricetopredictitsprobabilityversustheoutsidegood.

Inthefinalstepinthisexercise,werecoveredtheunconditionalprobabilityofthe

outsidegoodthroughalgebraicmanipulation:

(9)

)1)exp()/(exp(1

1

)exp(/

)exp(Pr/Pr

bXbXPR

PRPRPR

bXPPR

bX

EXCESINO

NOEXCESI

EXCNOEXC

ESINOESI

WeusedthesamemethodtosolvefortheprobabilitiesofofferingESIandtheexchange

option.

IV. ResultsandStudyLimitations

A. Results

Table3providesdescriptivestatisticsbyfirmsizefortheaveragetaxsubsidy,

individualmandate,employerpenalty,andexchangesubsidyperworkerinestablishments

thatofferinsuranceandthosethatdonot.Allestimatesareweightedbythenumberof

workersintheestablishment.

Asnotedabove,thevalueoftheESItaxsubsidyisafunctionofworkers’incomes

andplanpremiums.Acrossallestablishments,themeansubsidyis$2,728perworker.

18  

Amongemployersthatofferinsurance,theaveragetaxsubsidyperworkerrangesfrom

$2,487forsmallfirmsto$3,065forlargeones.Theestimatedaveragetaxsubsidiesfor

non‐offeringemployersareconsiderablylower.

Acrossworkersinallestablishments,theindividualmandatepenaltyperworkeris

$1,615.Workersinnon‐offeringsmallfirmshavethelowestindividualmandatepenalties.

Smallfirms(andtheirworkers)arealsoexemptfromthesharedresponsibility

requirementiftheydonotoffercoveragein2014.Incontrast,theaverageemployer

penaltyamonglargerfirmsthatdonotofferinsuranceis$1,566perworker.

Theaverageexchangesubsidyperworkerreflectsdifferencesinworkers’incomes

acrossfirmsizes.Notably,theaverageexchangesubsidyforworkersinnon‐offeringsmall

andmediumemployersisabouttwiceaslargeasthosethatsponsorinsurance($3,197vs.

$1,473formediumsizeemployers),suggestingthatworkersinnon‐offeringemployers

haveconsiderablylowerincomes.

Table4summarizesthetaxpricesforthebaselineESIofferaswellasthe2014ESI

optionandthe2014individualexchangeoption.Overall,theaveragetaxpriceforESIat

baselineis.67,withthelargestvariationbythewagecategoryofanestablishment.The

secondandthirdcolumnsofTable4summarizetheaveragetaxpricesforESIandthe

individualexchangeoptionin2014.RecallthattheESItaxpriceincorporatesthevalueof

theESItaxsubsidyandtheindividualmandate,whereasthe2014individualexchangetax

priceincludesthevalueofexchangesubsidiesandtheindividualmandate.

Theaverage2014ESItaxpriceis.30,whichisconsiderablylowerthanthebaseline

ESItaxprice.Allelseequal,thisimpliesthatanESIofferwillbemuchmoreattractivein

2014whentheACAprovisionsgointoeffect.Workerswhochoosetheindividualexchange

19  

optionforgotheESItaxsubsidy,buttheymaybeeligibleforexchangesubsidiesiftheyare

lower‐incomeanddonothaveaccesstoanotherESIofferthroughaspouse.Theestimated

averagetaxpricefortheindividualexchangeoptionis.52,suggestingthatittoois

relativelymoreattractivecomparedwithESIatbaseline.

Table4alsoillustrateshowtheeconomicincentivesinthe2014taxpricesvaryby

workforceandestablishmentcharacteristics.Weobserveamodestchangeintheaverage

ESItaxpriceforsmallfirms(0‐49workers)betweenbaselineand2014(.68to.45)

comparedwithlargefirms(.66to.22),dueinparttotheexemptionofsmallfirmsfromthe

sharedresponsibilityrequirement.

Table5reportssimulationsfortheprobabilitiesofanESIoffer,theindividual

exchangeoption,andtheoutsidegoodfollowingtheintroductionofkeyACAprovisions.

Column(1)istheaveragepredictedprobabilityofthebaseline(pre‐2014)ESIoffer.

Columns(2),(3)and(4)areunconditionalaveragepredictedprobabilitiesofanESIoffer,

theindividualexchangeoption,andtheoutsidegoodin2014.

ThetoprowinTable5providestheresultsfortheoverallpopulation,weightedby

thenumberofemployeesinprivate‐sectorU.S.establishments.Theaveragepredicted

probabilityofanESIofferfallsfrom.83atbaselineto.66in2014(seecolumn2).However,

muchofthisdeclineisoffsetbytheindividualexchangeoption,whichhasanaverage

predictedprobabilityof.26.Theoutsidegoodprobabilityfallsfrom.17atbaselineto.08in

2014.

Table5alsoreportstheaveragepredictedprobabilitiesofeachoptionbyfirmsize.

Atbaseline,theaveragepredictedprobabilityofanESIofferforverysmallemployers(<9

workers)is0.35comparedwith0.95forlargeemployers(500ormoreworkers).We

20  

observeanon‐linearpatternofpredicteddeclinesinESIoffers:decreasesinESIoffersare

modestforverysmallandverylargeemployers(11%fortheformerand15%forthe

latter),butthechangesareconsiderablylargerforemployerswithbetween25and499

workers.

ThebiggestdeclineinESIofferprobabilityisforworkersintheaccommodation,

foodservice,entertainmentandrecreationservicesindustries,wheretheprobabilityofan

ESIofferfallsfrom.69to.42(39percentdecline).However,themodelalsopredictsthat

manyworkersintheseindustrieswillshifttotheindividualexchangeoption,basedonthe

offeringprobabilityestimateof.43.Otherindustriespredictedtohavelargedecreasesin

ESIoffersareconstruction(.70to.49)andretailandwholesaletrade(.86to.65).In

contrast,wepredictthesmallestchangesinESIoffersfortheprofessionalservicesand

finance,insurance,realestateandcompanymanagementindustries.

ThereisaclearpatternofESIoffersbasedonthepresenceofunionizedworkers.At

baseline,establishmentswithnounionizedworkershaveanaverageprobabilityofoffering

ESIof.81comparedwith.93forestablishmentswithaunionpresence.Themodelpredicts

thattheaverageprobabilityofofferingESIinestablishmentswithoutaunionpresencewill

dropto.63(22%drop),butemployerswithaunionpresencewillseeasmallerdeclineto

.82(11%drop).

Thedemographiccompositionofanestablishment’sworkersisimportantforESI

offers.ThesimulationsshowdifferentialchangesinESIoffersbyage,wherebyemployers

withayoungworkforce(lessthan20%oftheworkersage50orolder)havealarger

predicteddecreaseintheprobabilityofofferingESIcomparedwithestablishmentswith

higherconcentrationsofolderworkers.

21  

B. StudyLimitations

Severallimitationsareworthnoting.First,wedidnotconsiderotherACA

provisionsthatwillaffectemployers.Oneistheavailabilityofpremiumtaxcreditsfor

smalllow‐wageemployerstoofferESI.Whilethissubsidymayincreasetheprobabilityof

ESIoffers,earlyevaluationssuggestthatithasbeenineffective(GeneralAccountingOffice,

2012).

Wedidnotmodelthevalueofcost‐sharingcreditsthatwillbeavailableforworkers

withincomesbelow250%FPLwhoobtainexchange‐basedcoverage.Thesecreditswill

raisetheactuarialvalueofthesilverplantoamoregenerousplanwith94%actuarialvalue

forindividualswithincomeof100‐150%FPL,87%forthosebetween150‐200%FPL,and

73%forthosebetween200‐250%(www.kff.org,2010).Thiswillincreasethevalueofthe

exchangesubsidyandwillmakethisoptionmoreattractiveforemployerswithworkers

whowouldqualify.

AnotherESIprovisionwedidnotmodelwillimposepenaltiesonemployersthatdo

notoffer‘affordable’coverageforcertainlower‐incomeworkers.Weassumeemployers

willofferaffordablecoverage.

Wealsousedanaverageexchangepremiumthatvariesonlybyfamilycoverage

tiers(single,employee‐plus‐one,andfamily).In2014,exchangepremiumswillbe

determinedbymodifiedcommunityrating.Adjustmentswillbebasedonfamilycoverage

tiers,age(3:1rateband),geography,tobaccousestatus,andtheactuarialvalue.Whilewe

accountforfamilycoveragetiersinthemodel,wedidnotconsidereithertheage

distributionofanestablishment’sworkersorgeographywhenestimatingtheexchange

premiumfor“ESI‐like”coverage.Olderworkerswillfacehigherpremiumsforindividual

22  

exchangepoliciesthanyoungerworkers.Thiswillleadtoalargerindividualexchangetax

priceandreducetheattractivenessofthisoptionforfirmswitholderworkers.

Additionally,inestimatingthecompensationreturnedtoemployeesifanemployer

shiftsfromofferinginsurancetonotofferingit,weassumedthateachworkerwould

receivetheaverageemployerportionofthepremium.Itisdifficulttoknowatpresent

whetheremployerswillbehaveinthiswayoruseamorerefinedapproachwhenmaking

compensationadjustments.Moreover,ouranalysesdonotassumeanystickinesswith

respecttoadjustingcompensationpackages.Ifthisisdifficult,theremaybealagindrops

ofcoverageuntilcompensationpackagescanbeadjusted.Asecondimportantlimitationis

thatweusedtheestimatedparametersfromtheESIoffermodeltopredicttheprobability

oftheindividualexchangeoption.Implicitly,weassumedthatworkersperceivethe

qualityofESIandexchangeinsuranceasidentical.Althoughwedidaccountfordifferences

intaxprices,loadingfees,andcoveredspending(weassumedthatworkerswhopurchase

individualexchangecoveragewill“buyup”theircoveredspendingrelativetothesilver

plan),wewerenotabletoaccountforotherpotentiallyimportantfactors–suchashigher

shoppingcostsintheexchanges.Becausetheindividualexchangeoptiondoesnotyet

exist,onecannotknowhowimportantthesefactorswillbe.

Also,wesimulatedtheprobabilitiesofthethreeoptionssolelythroughmeasurable

changesinthetaxpricewithoutmakingexplicitadjustmentsforthedegreeof

“substitutability”betweenESIandindividualcoverageorthepersistenceofESI,asother

simulationmodelshavedone.IfworkersperceivetheircurrentESIoffersasbetterthan

exchangecoverage,ourmodelmaypredicttoomuchflightfromESItoexchanges.

23  

Finally,oneoftheACA’sgoalsistoimprovethefunctioningoftheunregulated

individualinsurancemarket(the“outsidegood”inourmodel).TotheextenttheACAis

effectivethismayreducetheprobabilitiesofbothESIandindividualexchangeoptions.

Thebestwaytoestimatethe“full”choicemodelthatwillbeavailablein2014maybeto

usenestedlogit,withESIandindividualexchangecoverageinthe“insurancenest”versus

theoutsideoption.IfemployeesperceiveESIandindividualexchangesassimilar,thismay

alsoreducetheprobabilityofchoosingtheinsurancenest.

V. DiscussionandPolicyImplications

TheeconomicincentivescreatedbytheACAarepredictedtohavealargeeffecton

theoveralldemandforinsurancebyU.S.workersandonthesourcesthroughwhichthey

obtaincoverage.Oursimulationspredictthatoveralldemandforinsurancewillrisein

responsetotheACA,drivenlargelybyworkers’desiretoavoidtheindividualmandate

penaltyandtheavailabilityofsubsidizedprivateinsuranceinexchanges.Notably,the

“outsidegood”optionwhichincludesbeinguninsuredispredictedtobe8%forworkersin

private‐sectorU.S.establishments,aratefarlowerthanthe17%baseline(pre‐ACA)rate.

Employerswhoseworkersstandtobenefitthemostfromtheavailabilityofanew

option–purchasingsubsidizedprivateinsuranceinexchanges–aretheleastlikelytooffer

ESIinresponsetotheACA.Whilesmallandmedium‐sizeemployershavelowerbaseline

ratesofESIoffers,oursimulationshowsadditionalmovementawayfromESI.TheACA

providesfewerincentivesforsmallfirmstoofferESIcomparedwithlargerfirms,giventhe

absenceofasharedresponsibilityrequirement.Medium‐sizeemployersmayshiftaway

fromESIandtowardtheindividualexchangeoptionbecauseworkersinthese

establishmentshavelowerincomesandcanreceivelargerexchangesubsidiesthan

24  

workersinlargefirms.Establishmentsinaccommodation,foodservice,entertainment,

recreationservices,andconstructionindustriesalsoarelikelytohavehigherpercentages

ofworkersqualifyingforpremiumtaxcredits.Thismayshifttheirmostpreferredchoice

fromofferingESItoofferingtheexchangeoption.

TherearecleartradeoffsforworkersbetweenpurchasingESIandindividual

coverageinexchanges.First,giveneconomiesofscale,ESIgenerallyhaslower

administrativeloadingfeesthanindividualcoverage.Asaresult,individualsgetmore

“bangfortheirbuck”throughgroupcoverage.However,employersmaynotofferworkers

achoiceofplansandtheplan(s)theyoffermaynotbewhattheindividualswouldhave

chosenontheirown.Withtheintroductionofexchangesandtheavailabilityofdifferent

typesofplansbasedonactuarialvalue,workersmayselectplansthatalignmoreclosely

withtheirpreferences.

Second,whileanemployer’sdecisiontoofferinsuranceisbinary,thesubsequent

effectsofthatdecisiononworkersmaybequitevaried.Clearly,low‐wageworkerswho

lackaccesstoESIthroughaspousestandtogainthemostfrompremiumtaxcredits

offeredinexchanges.Incontrast,high‐wageworkersmaynotqualifyforanysubsidyand

paythefullpremium.Further,becauseexchangepremiumswillbeage‐rated,older

workerswilllikelyfacehigherpremiumsthantheywouldinanemployergroupsetting.

Finally,thereisstillmuchuncertaintyregardinghowwellinsuranceexchangeswill

functionintermsofproductofferings,premiums,andtheconsumerexperience.

Employersmaytakea“waitandsee”attitudebeforeswitchingfromESItotheindividual

exchangeoption.Lookingahead,itwillbeimportanttomonitoremployerresponsesand

toassesstheimpactofACAprovisionsonworkers’choices.

25  

References

Abraham,J.,P.Graven,andR.Feldman.“NewEvidenceonEmployerPrice‐SensitivityofOfferingHealthInsurance.”2013,Unpublishedmanuscript.

DeNavas‐Walt,C.,B.Proctor,andJ.Smith.“Income,Poverty,andHealthInsuranceintheUnitedStates:2011,”U.S.CensusBureau,September2012,http://www.census.gov/prod/2012pubs/p60‐243.pdf

Dowd,B.andR.Feldman.“VoluntaryReductioninHealthInsuranceCoverage:ATheoreticalAnalysis.”EasternEconomicJournal.1987,33(3):215‐231.

Feenberg,D.andE.Coutts.“AnIntroductiontotheTAXSIMModel.”JournalofPolicyAnalysisandManagement,1993,12(1):189‐194.Gabel,J.,R.Lore,R.McDevitt,J.Pickreign,H.Whitmore,M.Slover,E.Levy‐Forsythe.“MorethanHalfofIndividualHealthPlansOfferCoveragethatFallsShortofWhatCanBeSoldThroughExchangesasof2014.”HealthAffairs.2012,31(6):1‐10.GeneralAccountingOffice.“SMALL EMPLOYER HEALTH TAX CREDIT Factors Contributing to Low Use and Complexity.” May 2012. Accessed at: http://www.gao.gov/assets/600/590832.pdf.Gruber,J.andM.Lettau,“HowElasticIstheFirm’sDemandforHealthInsurance?”JournalofPublicEconomics,88:7(2004),1273‐1293.

Karaca‐Mandic,P.,J.Abraham,andC.Phelps.“HowdoLoadingFeesVarybyGroupSize?:ImplicationsforHealthReform.”InternationalJournalofHealthCareFinanceandEconomics.2011,11(3):181‐207.

Marquis,M.S.andS.Long,“Workerdemandforhealthinsuranceinthenon‐groupmarket.”JournalofHealthEconomics.1995,14:47‐63. 

   

26  

Table 1:  Descriptive Statistics 

Variable SmallEmployers MediumEmployers LargeEmployers

NoOffer(n=32395)

Offer(24587)

NoOffer(N=1351)

Offer(N=12431)

NoOffer(n=859)

Offer(N=22069)

Averagetaxprice 0.7072 0.6665 0.7226 0.6683 0.6903 0.6624

Averagefamilyincome($10,000s) 4.0537 6.1835 3.8016 6.1088 4.6561 6.5925

Multi‐locationestablishment(%) 2.31 5.43 28.28 36.78 76.29 92.6

Businesstenure<1year 2.05 0.39 0.99 0.29 0.37 0.11

Businesstenure1‐4years 18.11 8.01 11.22 4.37 3.46 1.1

Businesstenure5‐9years 19.89 13.41 15.24 7.45 16.65 2.09

Businesstenure10ormoreyears 59.96 78.19 72.54 87.89 79.53 96.71

Non‐profitownership 6.49 10.66 4.96 19.76 3.11 14.27

Retailorwholesaletrade 14.91 17.35 9.9 13.83 14.11 20.23Accommodation,foodservice,entertainment/recreationservices 23.91 7.49 34 11.66 20.33 9.75Personaloradministrative,buildingsupportservices 12.63 8.88 19.89 7.18 35.7 10.32

Professionalservices 18.83 28.16 15.03 30.16 14.78 26.55

Religious,civilorothernon‐profit 4.13 5.64 1.1 3.01 0.08 0.31Finance,insurance,realestate,companymanagement 5.46 7.51 1.86 7.47 7.87 13.36

Manufacturingormining 3.8 9.25 5.89 15.63 3.78 11.71

TransportationorUtilities 2.58 2.53 2.72 2.92 2.54 6.14Construction,agriculture,forestry,fishing,hunting,orunknown 13.76 13.19 9.61 8.15 0.8 1.61

Someunionemployees 2.41 4.46 6.57 10.33 10.36 28.65

Lessthan20%ofworkersage50orolder 59.54 52.03 75.74 46.6 64.49 40

20‐50%ofworkersage50orolder 26.27 36.25 19.26 46.81 32.79 54.76

Morethan50%ofworkersage50orolder 14.19 11.72 5.01 6.6 2.72 5.24Lessthanorequalto33%ofworkersarefemale 39.7 46.34 30.94 36.77 24.33 22.15

Greaterthan33‐66%ofworkersarefemale 24.58 25.1 36.59 33.96 50.94 49.71

Morethan66%ofworkersarefemale 35.72 28.56 32.46 29.27 24.72 28.14Percentofestablishment'sworkersthatarepart‐time 40.93 17.81 42.08 17.31 26.69 20.8

Countyunemploymentrate 8.21 7.94 8.24 8.03 8.26 8.01Proportionofestablishmentsinacountythathaveover50workers 0.0504 0.0533 0.054 0.0548 0.0556 0.0568Notes:Allvaluesweightedbyemployeesinanestablishment. *DenotesvariablesimputedfromtheMEPS‐HouseholdComponent

27  

Table 2:  Binary Logit Model of Establishment’s Probability of Offering ESI  

Variable SmallEmployers MediumEmployers LargeEmployers

MarginalEffect

SE ZMarginalEffect

SE ZMarginalEffect

SE Z

Averagetaxprice ‐.2812 .0227 ‐12.3731 ‐.2319 .0441 ‐5.2556 ‐.1383 .0524 ‐2.6395

Averagefamilyincome($10,000s) .0972 .0011 85.9065 .0665 .0029 22.8243 .0450 .0027 16.6342

Firmsize0‐9 Ref Ref Ref . . . . . .

Firmsize10‐24 .2519 .0055 46.1494 . . . . . .

Firmsize25‐49 .3616 .0079 46.0304 . . . . . .

Firmsize50‐99 . . . Ref Ref Ref . . .

Firmsize100‐499 . . . .0398 .0074 5.3815 . . .

Firmsize500andmore . . . . . . . . .

Multi‐locationestablishment(%) ‐.0246 .0106 ‐2.3305 ‐.0185 .0075 ‐2.4649 ‐.0466 .0247 ‐1.8885

Businesstenure<1year Ref Ref Ref Ref Ref Ref Ref Ref Ref

Businesstenure1‐4years .0583 .0212 2.7449 ‐.0162 .0497 ‐.3261 .0403 .0455 .8863

Businesstenure5‐9years .0981 .0211 4.6430 ‐.0183 .0488 ‐.3760 .0727 .0431 1.6865

Businesstenure10ormoreyears .1653 .0207 7.9665 .0084 .0477 .1763 .0841 .0403 2.0858

Non‐profitownership .0990 .0112 8.8098 .0537 .0101 5.3236 .0845 .0149 5.6632

Retailorwholesaletrade .1108 .0137 8.1130 .0576 .0349 1.6481 .2031 .0414 4.9005

Accommodation,foodservice,entertainment/recreationservices

.0115 .0145 .7941 .0605 .0345 1.7534 .1998 .0422 4.7365

Personaloradministrative,buildingsupportservices

.0502 .0142 3.5414 ‐.0015 .0359 ‐.0406 .0833 .0412 2.0196

Professionalservices .0045 .0126 .3615 .0244 .0332 .7364 .0482 .0399 1.2087

Religious,civilorothernon‐profit

Ref Ref Ref Ref Ref Ref Ref Ref Ref

Finance,insurance,realestate,companymanagement

.0069 .0141 .4929 .0074 .0371 .2007 .0840 .0408 2.0576

Manufacturingormining .1524 .0156 9.7606 .0687 .0357 1.9228 .2139 .0475 4.5058

TransportationorUtilities .0675 .0177 3.8119 .0317 .0394 .8050 .1703 .0445 3.8224

Construction,agriculture, .0792 .0140 5.6608 .0276 .0408 .6762 .2110 .0502 4.2024

28  

forestry,fishing,hunting,orunknown

Someunionemployees ‐.0322 .0131 ‐2.4588 ‐.0175 .0201 ‐.8679 ‐.0486 .0082 ‐5.9307

Lessthan20%ofworkersage50orolder Ref Ref Ref Ref Ref Ref Ref Ref Ref20‐50%ofworkersage50orolder

.0286 .0050 5.7603 .0224 .0078 2.8813 ‐.0149 .0067 ‐2.2336

Morethan50%ofworkersage50orolder

‐.0482 .0058 ‐8.3323 ‐.0232 .0134 ‐1.7304 ‐.0073 .0123 ‐.5890

Lessthanorequalto33%ofworkersarefemale

Ref Ref Ref Ref Ref Ref Ref Ref Ref

Greaterthan33‐66%ofworkersarefemale

.0782 .0058 13.4395 .0127 .0096 1.3185 ‐.0099 .0089 ‐1.1104

Morethan66%ofworkersarefemale

.0498 .0056 8.8586 ‐.0081 .0102 ‐.7917 .0322 .0101 3.2002

Percentofestablishment'sworkersthatarepart‐time

‐.0023 .0001 ‐36.0305 ‐.0012 .0001 ‐11.0864 ‐.0002 .0001 ‐2.0251

Countyunemploymentrate ‐.0036 .0013 ‐2.7084 ‐.0018 .0018 ‐1.0009 .0003 .0018 .1429

Proportionofestablishmentsinacountythathaveover50workers

.5335 .1616 3.3006 ‐.2657 .2604 ‐1.0201 .5674 .3036 1.8692

Year2008 Ref Ref Ref Ref Ref Ref Ref Ref Ref

Year2009 ‐.0034 .0067 ‐.5077 .0057 .0109 .5262 .0045 .0093 .4811

Year2010 ‐.0108 .0070 ‐1.5351 ‐.0002 .0110 ‐.0137 .0117 .0102 1.1455

29  

Table 3:  Economic Incentives of Establishments to Offer Insurance in 2014 

AveragePerWorker Overall SmallEmployers

MediumEmployers

LargeEmployers

NoOffer Offer NoOffer Offer NoOffer OfferESITaxSubsidy $2728

$1789 $2487 $1734 $2709 $2021 $3065

IndividualMandate $1615

$1106 $1667 $1004 $1621 $1192 $1734

EmployerPenalty $1033

$0 $0 $601 $1156 $1439 $1566

ExchangeSubsidy $1573

$2982 $1289 $3197 $1473 $2368 $1330

 

 

 

30  

Table 4:  Estimated Tax Prices Overall and by Selected Establishment and Workforce Characteristics 

CharacteristicBaselineESITaxPrice

2014ESITaxPrice

2014IndividualExchangeTaxPrice

Overall 0.67 0.3 0.52

FirmSize

0‐49 0.68 0.45 0.37

50‐99 0.68 0.33 0.41

100‐249 0.67 0.28 0.56

250‐499 0.67 0.26 0.56

500ormore 0.66 0.22 0.61

Industry

Retailorwholesaletrade 0.69 0.31 0.49Accommodation,foodservice,orentertainment/recreationservices 0.74 0.4 0.21

Personaloradmin/buildingsupportsvc 0.67 0.29 0.44

Professionalservices 0.65 0.28 0.66

Religious,civilorothernon‐proforgs 0.65 0.35 0.66

FIREorcompanymanagement 0.65 0.25 0.69

Manufacturingortiming 0.65 0.26 0.58

Transportationorutilities 0.67 0.28 0.6

Construction 0.66 0.36 0.37Agriculture,forestry,fishingorhunting,unknown 0.69 0.39 0.17

UnionStatus

Nounionemployees 0.67 0.31 0.49

Someunionemployees 0.65 0.24 0.67

AgeCategory

Less20percentoverage50 0.68 0.31 0.43

20‐50%overage50 0.66 0.28 0.6

Morethan50%overage50 0.66 0.35 0.58

SexCategory

Lessthan33%female 0.67 0.31 0.5

34‐66%female 0.68 0.28 0.52

Morethan67%female 0.67 0.32 0.55

WageCategoryofEstablishment

Morethan50%under$11/hour 0.72 0.42 0.19Lessthan50%under$11/hour&less50%over$26/hour 0.66 0.29 0.57

Morethan50%over$26/hour 0.63 0.2 0.72 

31  

Table 5:  Simulation Results Overall and by Selected Establishment and Workforce Characteristics 

Characteristic

BaselineProbabilityofESIOffer

2014ProbabilityofESIOffer

2014ProbabilityofIndividual

ExchangeOption

2014ProbabilityofOutsideGood

Overall .83 .66 .26 .08 FirmSize 0‐9employees .35 .31 .24 .4510‐24employees .66 .44 .39 .1725‐49employees .78 .48 .43 .0950to99employees .87 .59 .37 .03100‐499employees .93 .68 .30 .02500ormoreemployees .95 .81 .19 .01Industry Retailorwholesaletrade .86 .65 .28 .07Accommodation,foodservice,entertainment,orrecreationservices

.69 .42 .43 .15

Personaloradministrativeandbuildingsupportservices

.74 .62 .27 .11

Professionalservices .87 .74 .20 .06Religious,civil,orothernon‐profitorganizations

.75 .59 .25 .16

Finance,insurance,realestate,orcompanymanagement

.90 .79 .16 .05

Manufacturingormining .94 .75 .23 .02Transportationorutilities .90 .75 .20 .05Construction .70 .49 .35 .16UnionPresence Nounionpresence .81 .63 .28 .1Someunionpresence .93 .82 .16 .02Age Lessthan20%overage50 .79 .60 .3 .0520%to50%overage50 .89 .73 .22 .18Morethan50%overage50 .73 .60 .22 .18Sex Lessthan33%female .81 .63 .27 .134‐66%female .87 .69 .26 .05Morethan66%female .81 .65 .24 .10