Affordable Care Act (ACA) Predictions for Employers

3 ACA Predictions That Haven't Come True for Employers

The ACA has no doubt created its share of administrative headaches for employers. But it hasn't quite had the catastrophic effects many thought it would have on American business.

As we pull to within two weeks of electing a new president, who could very well alter the trajectory of the health care law, let's take a look at three major ACA predictions that, as things stand today, have missed the mark.

Prediction 1: Employers would get out of the health care game.

When the ACA was passed in 2010, there were widespread predictions that employers would leap at the chance to drop coverage and send workers to fend for themselves on the insurance exchanges. But those predictions were largely wrong.

Granted, at the time, many employers claimed that they would opt for the "pay" route of the ACA's pay-or-play employer mandate. And, indeed, some smaller companies (less than 100 employees) have stopped sponsoring health coverage. But the vast majority that offered coverage before the law, particularly large employers,  have stayed committed to providing it. This year, according to the Congressional Budget Office, about 155 million Americans had employer-based health care. And that’s expected to remain the norm for another decade, with more than half of people under age 65 covered through their employers.

Ultimately, it's about employee recruitment and retention. Benefits - particularly health care benefits - are something workers expect as part of their compensation. According to Guardian Life Insurance, nearly 75 percent of employees say most of their financial security comes from workplace benefits, and four out of five say a company's benefits determine whether or not they take a new job. If an employer were to drop coverage, its employees would likely expect raises to pay for outside insurance - or would look for new employment. Since providing health insurance comes with considerable tax advantages, it just makes financial sense for employers to do so in an increasingly competitive job market.

Prediction 2: Jobs would die.

Another one of the warnings that the ACA's opponents gave early and often was that it would threaten jobs. Republican legislators repeatedly branded the health care law a "job killer," arguing that the employer mandate would lead many companies to fire workers and/or reduce hours so they would have to neither pay nor play. But current evidence suggests otherwise.

Since the ACA became law in March 2010, private-sector employment in the U.S. has grown from around 107 million to over 122 million. The nation is currently in the longest period of continuous job growth on record, closing in on full employment - to the point where the Federal Reserve has discussed raising interest rates.

And as for reduced hours, the incentive for employers to shift full-time (30+ hours) workers to part-time (<30 hours) certainly exists. But according to the BLS, the share of workers who are involuntary part-timers has actually fallen pretty sharply in the years since 2010.

Of course, it's important to understand that the ACA's life so far has essentially coincided with - and benefited from - a period of economic recovery for the U.S., following the Great Recession. While there's no real evidence that the ACA has destroyed jobs, it would be going too far to say that it has created jobs (outside of the health care industry, as you'd expect). The long-term impact of the ACA on the job market remains to be seen.

Prediction 3: Health care costs would soar.

In addition to the "job-killer" premonitions, ACA detractors speculated that the law would cause employer health care costs to soar. But while rates have certainly gone up, they haven't exactly skyrocketed.

In fact, employers have seen gradual decreases in cost growth every year since the ACA became law in 2010. And according to industry research, that trend should continue. For example, Mercer’s National Survey of Employer-Sponsored Health Plans revealed that employers expect a 4.2 percent health cost increase in 2016 – the lowest figure that study has ever reported. Meanwhile, PriceWaterhouseCoopers  projects the 2016 growth in the cost of medical services to be a 15-year low 6.5 percent.

Similar to the jobs situation, it's difficult to claim the ACA is the root cause of the deceleration in health care costs. But it's not difficult to see that the law's critics may have overestimated the law's negative impact on employers' bottom lines.

So what happens under a new president? Get a look into the future of the ACA and health care reform in this free, on-demand webinar.