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A preview of changes to health-care laws

By Amos Esty

Starting in 2014, businesses with 50 or more full-time employees will be required either to provide an insurance option to their employees or pay a fee for not doing so. This provision of the 2010 Affordable Care Act (ACA), often referred to as the employer mandate, provoked sharp resistance during the debate over the legislation and continues to face resistance today.

"This policy will lead to layoffs, reduced working hours, and dropped coverage for employees," warned Kansas Senator Jerry Moran recently. "Congress should repeal this damaging mandate."

But according to research by Carrie Colla, a Geisel health economist, such fears may be overblown. Colla has studied the implementation of a similar mandate in San Francisco and found that the ordinance increased access to health care without having a negative effect on employment. These findings, she says, may shed light on what will happen at the national level after implementation of the federal provision.

In a study published in Health Affairs, Colla outlined the details of the San Francisco plan and what happened in the two years following its implementation in 2008. The ordinance had two components. One was the creation of a public health-care option called Healthy San Francisco, which gave enrollees access to a limited number of providers in the city. It's not formal insurance, Colla notes, but it does give people who would otherwise be uninsured some medical coverage.

The second part of the ordinance is the employer mandate, which penalizes employers with 20 or more employees if they do not provide a health insurance option. Healthy San Francisco is paid for in part by fees collected from those employers. As with the employer mandate provision of the ACA, the San Francisco ordinance required that the coverage provided by employers meet a minimum level per employee.

If not for the ordinance, Colla concluded, another 10% of workers would be without employer-paid health benefits.

Colla and her coauthors were interested in examining whether the mandate caused employers to withdraw private insurance offerings, to offer a mini-medical plan, or to expand insurance coverage. To find out, they surveyed employers both within San Francisco and, as a comparison, in surrounding counties where the ordinance did not apply.

In 2007, before the ordinance went into effect, 93% of employers in San Francisco who would later become subject to the mandate offered health insurance. The mandate went into effect in 2008. By 2009, the percentage of firms offering insurance had increased to 96% in San Francisco. In counties surrounding San Francisco, the percentage dropped from 94% in 2007 to 90% in 2009.

During the same period, there was little difference in the increase in premiums between San Francisco and surrounding counties, but there were significant differences in who paid for those premiums. In San Francisco, employers increased their contributions to premiums by 17%. At the same time, the cost for employees rose only 9%, from $56 to $61. In surrounding counties, the cost of premiums paid for by employees rose by 50%, from $52 to $78. And if not for the ordinance, Colla concluded, another 10% of workers would be without employer-paid health benefits.

Despite the initial controversy surrounding the policy, including criticism from local business groups and a lawsuit that charged that the mandate was overly burdensome, by 2009 64% of employers supported the mandate, according to the survey.

"I think the main lessons are that it's feasible, that employers support it, and that—most important to us—it actually expanded coverage among workers," Colla says. She adds that these findings might bode well for the implementation of the employer mandate portion of the ACA next year. "I think some of the resistance will die down when employers learn more about it and as it becomes the norm," she says. "I'm hopeful that it will be implemented smoothly. But we'll see."

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Geisel School of Medicine at DartmouthDartmouth-Hitchcock Medical CenterWhite River Junction VAMCNorris Cotton Cancer CenterDartmouth College