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

52 Pages Posted: 21 Aug 2015

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: September 2015

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 nonprovision of insurance) and employee bonuses (to ensure the shift is cost neutral for employees)? State and local governments (SLGs) have strong incentives to consider the economics of such “divestment”; many have particularly 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 and (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 (September 2015). Journal of Empirical Legal Studies, Vol. 12, Issue 3, pp. 343-394, 2015. Available at SSRN: https://ssrn.com/abstract=2648647 or http://dx.doi.org/10.1111/jels.12076

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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