Employer Health Insurance: Still Intact

When the Affordable Care Act was signed into law in 2010, were you among the employees who feared it was only a matter of time before your company dropped health insurance coverage? Well, you can finally breathe a sigh of relief. “Most companies, and particularly large employers, that offered coverage before the law have stayed committed to providing health insurance,” says The New York Times. That’s definitely good news, considering that many of the plans offered through the Health Insurance Marketplace are far less comprehensive than many employer-based plans. Unfortunately, the more attractive options are often accompanied by highercopays and deductibles and have far fewer providers to choose from. (For more, see Where to Find Affordable Health Insurance.)

The Case for Employer Health Insurance

• Tradition – For starters, healthcare coverage is an essential part of the traditional employee benefits package. “[It] remains an important recruitment and retention tool as the labor market has tightened in recent years. Desirable employees still expect health benefits, and companies are responding,” notes the Times.
• Financial Impact – You must also consider the financial impact on employees if employers cut the cord on healthcare coverage. “[Employers] would almost certainly be pressured – especially in a strong labor market – to add enough money to workers’ paychecks to cover the cost of buying insurance on the marketplace,” the article adds. There’s a valid reason for that: For middle- and lower-class families, the financial burden could easily be too much to bear.
• Tax Benefits – While employers dole out large sums of cash to provide healthcare benefits, they also enjoy tax breaks that come with the territory. According to IRS Publication 535, “If an S Corporationpays accident and health insurance premiums for its more-than-2% shareholder-employees, it generally can deduct them, but must also include them in the shareholder’s wages subject to federal income tax withholding.”
• Costly Penalties for Employers –Should an employer decide to drop coverage and stick it to the employees, the initial costs could seemingly outweigh the benefits. That’s because employers with 50 or more workers incur a tax penalty of about $2,000 per employee when they opt out of providing health insurance, according to The New York Times. In addition, the company would lose its tax break.

The Future of Employer Health Insurance

Approximately 155 million Americans, or 57% of the population under 65, are projected to be covered by an employer-based healthcare plan in 2016, according to a recent analysis from the Congressional Budget Office. This number is slated to decrease to 152 million by 2026.

In 2015, 98% of large firms – those with 200 or more workers – offered some form of coverage. However, only 56% of small firms – those with three to 199 workers – provided healthcare benefits, due to the rising costs of premiums. And “since most firms in the country are small, variation in the overall offer rate is driven primarily by changes in the percentages of the smallest firms (three to nine workers) offering health benefits,” according to areport from the Henry J. Kaiser Family Foundation.

What does this mean for those entering the job market in the near future? If you are currently seeking employment at a large firm, expect to see some form of health coverage offered in your benefits package. However, if you are considering a smaller firm, you may have to explore other options.

The Bottom Line

Despite predictions that the Affordable Care Act would lead to a steep decline in employer-based health insurance plans, recent trends have proved otherwise. Unless small businesses are your only option for employment, you probably won't have to rely on the Health Insurance Marketplace for coverage. (For more, seeWhy Is Healthcare so Expensive in the U.S.?)