An Offer You Can’t Refuse

Estimating the Coverage Effects of the 2010 Affordable Care Act

Abstract

Proponents of the Patient Protection and Affordable Care Act and the companion Health Care and Education Reconciliation Act of 2010, known collectively as the Affordable Care Act (ACA) , expect that the law will substantially expand health insurance coverage to the 17.6 percent of currently uninsured, non-elderly working Americans, without dramatically changing the terms under which the currently insured now receive their health insurance. Conversely, critics claim that the nature of currently insured workers’ coverage will change. They predict the ACA mandates requiring firms to provide health insurance to their workers or face a fine will cause large scale reductions in hiring and that the ACA subsidies for health insurance coverage available outside of employer arrangements for some lower income families will substantially crowd out employer-sponsored health insurance and discourage work.

This new research suggests that neither the ACA’s fiercest critics nor its most devout proponents are quite on point. If you are currently insured through your employer, you can decide to keep your plan—but, if you meet certain income requirements, you may not want to. As a consequence of two poorly understood factors, subsidies in the new law could incent millions of employees to willingly shift from an employer plan to a government-subsidized insurance exchange–even if their employers continue to offer coverage. This would come at a significant cost to taxpayers.