How the HELP Committee's Draft Legislation Would Affect Employer-Sponsored Insurance

June 16, 2009

We have received several questions aboutCBO's analysis of the draft health care reform legislation released by the Committee on Health, Education, Labor, and Pensions (HELP)---in particular, about the legislation's effects on employer-sponsored coverage. Looking at one year---2017---as an example, CBO estimates that, under the HELP proposal, about 147 million people would have employer-sponsored insurance in that year, 15 million fewer than would have such insurance under current law. What changes would produce that result?

Some individuals would have insurance coverage available from their employer, but would also have an option to obtain subsidized insurance from an exchange. That opportunity would exist for people whose incomes were sufficiently low---and the cost of employer-sponsored insurance sufficiently high---so that the insurance would be categorized as "unaffordable" under rules that would be set by the Secretary of Health and Human Services. (Although the draft legislation does not specify a standard for affordability, CBO and the staff of the Joint Committee on Taxation assumed that coverage would be deemed unaffordable if workers had to pay a larger share of their income for their employers plan than they would have to pay in the exchanges.) By CBO's estimate, about 10 million people with this choice would opt to obtain insurance from exchanges rather than from their employer.

The availability of subsidized coverage in the new insurance exchanges would be an attractive option for many lower-income workers. As a result, some employers would decide not to offer their employees health insurance coverage, opting insteadto provide other forms of compensation. CBO estimates that about 10 million individuals who would be covered through an employer's plan under current law would not have access to that coverage under the draft legislation because some employers wouldchoose notto offer it.

Finally, approximately 5 million more individuals would obtain employer-based coverage under the proposal (compared with the number under current law) either because they worked for a firm that newly began to offer coverageas a resultof the legislation or because they decided toenroll in aninsurance plan that the employer would offer under current law but which they would notselect in the absence of the legislation. (Some workers wouldvalue anemployer's offer of insurance and be more willing to sign up for it because of the legislations requirement for individuals to have insurance; some employers would begin to offer insurance to accommodate employees desires and to take advantage of the subsidies that would be provided for some small businesses.)