Will Divestment from Employment-Based Health Insurance Save Employers Money? The Case of State and Local Governments

65 Pages Posted: 16 Jun 2014

See all articles by Jeremy Goldhaber-Fiebert

Jeremy Goldhaber-Fiebert

Stanford University

David Studdert

Stanford Law School

Monica Farid

Stanford University

Jay Bhattacharya

Stanford University - Center for Primary Care and Outcomes Research; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: June 2014

Abstract

Reforms introduced by the Affordable Care and Patient Protection Act (ACA) build new sources of coverage around employment-based health insurance. But what if firms find it cheaper to have their employees obtain insurance from these sources, even after accounting for penalties (for non-provision of insurance) and employee bonuses (to ensure the shift is cost neutral for them)? State and local governments (SLGs) have strong incentives to consider the economics of such “divestment”; many have large unfunded benefits liabilities. We investigated whether SLGs would save under two scenarios: (1) shifting all employees and under-65-retirees to alternative sources of coverage; (2) shifting only employees whose household incomes indicate they would be eligible for federally subsidized coverage and all under-65-retirees. Full divestment would cost SLGs more than they currently pay, due primarily to penalty costs. Selective divestment could save SLGs nearly $129 billion over 10 years at the expense of the federal government.

Suggested Citation

Goldhaber-Fiebert, Jeremy D. and Studdert, David and Farid, Monica and Bhattacharya, Jayanta, Will Divestment from Employment-Based Health Insurance Save Employers Money? The Case of State and Local Governments (June 2014). NBER Working Paper No. w20222. Available at SSRN: https://ssrn.com/abstract=2450922

Jeremy D. Goldhaber-Fiebert (Contact Author)

Stanford University ( email )

Stanford, CA 94305
United States

David Studdert

Stanford Law School ( email )

Stanford, CA 94305
United States

Monica Farid

Stanford University ( email )

Stanford, CA 94305
United States

Jayanta Bhattacharya

Stanford University - Center for Primary Care and Outcomes Research ( email )

Center for Health Policy
179 Encina Commons
Stanford, CA 94305-6019
United States
650-736-0404 (Phone)
650-723-1919 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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