Affordability of Insurance: Affordability of Insurance: Application of ACA Definitions in aApplication of ACA Definitions in a

Linked Employee-Employer Data Set Linked Employee-Employer Data Set

G. Edward MillerG. Edward MillerThomas M. SeldenThomas M. SeldenJessica P. VistnesJessica P. Vistnes

AHRQ Conference September 10, 2012AHRQ Conference September 10, 2012

Affordable Care Act (ACA)Affordable Care Act (ACA)

The ACA will expand access to health insurance by: The ACA will expand access to health insurance by:

– Subsidizing Exchange coverage (139-400% FPL)Subsidizing Exchange coverage (139-400% FPL)

– Expanding Medicaid (≤138% FPL)Expanding Medicaid (≤138% FPL)

Research has found a relationship between employers’ Research has found a relationship between employers’ insurance decisions and alternative forms of coverage for insurance decisions and alternative forms of coverage for employees. employees.

– Spousal offers of ESISpousal offers of ESI

– Public coverage Public coverage

The ACA will present employers with important new sources of The ACA will present employers with important new sources of insurance coverage to consider.insurance coverage to consider.

Important Information to Assess the ACAImportant Information to Assess the ACA

Important categories of Modified Adjusted Gross Family Income Important categories of Modified Adjusted Gross Family Income (MAGI) in the ACA. (MAGI) in the ACA. – ≤ ≤ 138% FPL 138% FPL (Medicaid eligible)(Medicaid eligible)

– 139-250% FPL 139-250% FPL (Large Exchange Subsidy)(Large Exchange Subsidy)

– 251-400% FPL 251-400% FPL (Small Exchange Subsidy)(Small Exchange Subsidy)

– > 400% FPL> 400% FPL (No Subsidy)(No Subsidy)

Important to know:Important to know:– Within-employer distribution of workers’ MAGI. Within-employer distribution of workers’ MAGI.

– Alternative sources of coverage. Alternative sources of coverage.

– PremiumsPremiums

No nationally representative data set has all required data.No nationally representative data set has all required data.

Employer-Sim ModelEmployer-Sim Model

Synthetic workforces: Synthetic workforces: – Use household data on workers to ‘populate’ establishment-Use household data on workers to ‘populate’ establishment-

level data on employers and their health insurance plans.level data on employers and their health insurance plans.

MEPS Insurance Component (IC): MEPS Insurance Component (IC): – 2010 data on private establishments2010 data on private establishments– Out-of-Pocket (OOP) premiums for all plans offeredOut-of-Pocket (OOP) premiums for all plans offered

MEPS Household Component (HC): MEPS Household Component (HC): – 2005-2007: pooled data on workers and their families2005-2007: pooled data on workers and their families– MAGI: constructed per ACA rules, CPI-adjusted to 2010 $sMAGI: constructed per ACA rules, CPI-adjusted to 2010 $s

Linking Workers to EstablishmentsLinking Workers to Establishments

Variable Category Level / Type of Information Used

Location State, Census region / division

Industry 2 Digit NAICS / collapsed codes

Multi-location firm? Y/N indicator

Establishment size Number of employees in ranges

Establishment offers insurance? Y/N indicator

Draw a sample of 300+ workers that match each establishment on these characteristics.

Include 100+ low, medium and high wage workers. Workers are sampled with replacement.

Raking Workers WeightsRaking Workers Weights

Variable Category Level / Type of Information Used

Sex % Female

Age % Age 50 plus

Union % In union

Wage % Low, medium, high wage

Fulltime % Fulltime

0/1 variables for MEPS HC workers Percent distributions in MEPS IC establishments. Iteratively adjust MEPS HC sample weights until worker

characteristics match estab. % distributions..

Synthetic WorkforcesSynthetic Workforces

Synthetic workforces (in principle) can be used to examine any employee/family characteristic from the MEPS HC.

Quality depends on correlation between the HC characteristic and variables used in linking and raking.

– We do not provide standard errors, which could be quite large given the multiple sources of data and imperfections in the synthetic match

Modified adjusted gross incomes are strongly related to many of the variables available to construct synthetic workforces.

Goals Goals

Estimate how many employers have a majority of Estimate how many employers have a majority of workers who are income-eligible for ACA-related workers who are income-eligible for ACA-related coverage.coverage.

Within predominantly subsidy-eligible firms, examine Within predominantly subsidy-eligible firms, examine the degree of variation in workers’ incomes.the degree of variation in workers’ incomes.

Examine issues related to the affordability of Examine issues related to the affordability of insurance.insurance.

Stratify Analysis by Firm-SizeStratify Analysis by Firm-Size

Large firms (50+ full-time workers)Large firms (50+ full-time workers)– Subject to fines if at least one full-time employee gets Subject to fines if at least one full-time employee gets

subsidized Exchange coveragesubsidized Exchange coverage

Small firms ( < 50 full-time workers) Small firms ( < 50 full-time workers) – No penalties for employees accessing Exchange coverageNo penalties for employees accessing Exchange coverage

– Tax credits for some firms with < 25 workers (started in 2010)Tax credits for some firms with < 25 workers (started in 2010)

Distribution of establishments, Distribution of establishments, by workers' family income, 2010 by workers' family income, 2010

Small Firms Large Firms

Offering ESI Not Offering Offering ESI

Total estabs (millions) 1.9 2.4 1.5

Majority of workers with Percent of Establishments

MAGI > 400% FPL 52.8 23.4 40.5

MAGI < 400% FPL 47.2 76.6 59.5

MAGI 139 to 400% FPL 37.9 60.4 47.8

Source: Authors’ calculations using data from the Employer-Sim ModelEstimates are weighted by MEPS-IC establishment weights. We did not estimate standard errors for point estimates from our simulation model.

Percent of workers within-establishment by income (MAGI as percentage of FPL)

≤138% 139- 250% 251-400% >400%

Majority of workers with: Small firms

MAGI > 400% FPL 1.9 10.3 20.5 67.3

MAGI < 400% FPL 7.2 25.8 32.0 35.0

MAGI 139-400% FPL 6.9 27.1 33.4 32.6

Majority of workers with: Large firms

MAGI > 400% FPL 2.0 10.8 21.7 65.5

MAGI < 400% FPL 9.1 28.3 28.9 33.7

MAGI 139-400% FPL 8.8 29.9 29.9 31.4

Distribution of incomes for full-time, eligible Distribution of incomes for full-time, eligible workers in establishments that offer ESI, 2010workers in establishments that offer ESI, 2010

Source: Authors’ calculations using data from the Employer-Sim ModelEstimates are weighted by MEPS-IC establishment weights. We did not estimate standard errors for point estimates from our simulation model.

Affordability of InsuranceAffordability of Insurance

ACA definition of affordability: ACA definition of affordability: – OOP premium for single coverage < 9.5% of MAGIOOP premium for single coverage < 9.5% of MAGI

Our definition of affordable dependent coverageOur definition of affordable dependent coverage– Dependent coverage if offeredDependent coverage if offered

– OOP premium for dependent coverage < 9.5% of MAGI OOP premium for dependent coverage < 9.5% of MAGI

Use the Employer-Sim Model to examine affordability.Use the Employer-Sim Model to examine affordability.– Re-weight the data to produce worker-level estimates Re-weight the data to produce worker-level estimates

– Focus on workers with MAGI between 139-400% FPL Focus on workers with MAGI between 139-400% FPL Potentially eligible for subsidized Exchange coverage.Potentially eligible for subsidized Exchange coverage.

Affordability (continued)Affordability (continued)

For full-time workers with MAGI 139-400% FPL, who For full-time workers with MAGI 139-400% FPL, who are offered insurance, we examine the percent of are offered insurance, we examine the percent of workers with:workers with:– Affordable single coverage (legal ACA definition)Affordable single coverage (legal ACA definition)

– ‘‘Affordable’ dependent coverage from own employer Affordable’ dependent coverage from own employer

Examine options for workers with “unaffordable” Examine options for workers with “unaffordable” dependent coverage:dependent coverage:– Spousal offer of ESISpousal offer of ESI

– Children eligible for public coverage with premiumChildren eligible for public coverage with premium

Affordability of Dependent CoverageAffordability of Dependent Coverage

Determine needed coverage for each family member:Determine needed coverage for each family member:– Assume persons ≤138% FPL, children with free public coverage, and Assume persons ≤138% FPL, children with free public coverage, and

persons with Medicare or Tricare do not need ESIpersons with Medicare or Tricare do not need ESI

– Others are assumed to need ESI provided by the worker Others are assumed to need ESI provided by the worker

Count the number of persons in workers’ health insurance Count the number of persons in workers’ health insurance eligibility unit (HIEU) who need ESI:eligibility unit (HIEU) who need ESI:– Caveat: MEPS HIEU definition does not account for new ACA rules for Caveat: MEPS HIEU definition does not account for new ACA rules for

dependents up to age 26dependents up to age 26

Calculate OOP premium, from own employer, to cover all who Calculate OOP premium, from own employer, to cover all who need ESI.need ESI.

Determine whether OOP premium < 9.5% of MAGI.Determine whether OOP premium < 9.5% of MAGI.

Distribution of OOP Premiums: Workers Distribution of OOP Premiums: Workers with MAGI 139%-400% FPL, 2010with MAGI 139%-400% FPL, 2010

Full-time, eligible workers with dependents

Percentile of the OOP premium distribution

Mean 10th 25th 50th 75th 90th 95th

Single coverage

Small firms 984 0 0 600 1,500 2,500 5,900

Large firms 804 0 300 700 1,100 1,600 3,500

Dependent coverage**

Small firms 3,833 0 0 3,100 6,200 9,100 11,200

Large firms 3,322 800 1,700 2,800 4,300 6,500 8,200

Source: Authors’ calculations using data from the Employer-Sim ModelEstimates are weighted by MEPS-IC worker-level weights. We did not estimate standard errors for point estimates from our simulation model. **Premiums for dependent coverage are conditional on an offer of dependent coverage.

Affordability of Single ESI: Workers with Affordability of Single ESI: Workers with MAGI 139%-400% FPL, 2010MAGI 139%-400% FPL, 2010

Full-time, eligible workers with no dependents

Within-establishment distribution of family income

All estabs Majority 139-400%

All estabs

Majority 139-

400%

Small firms Large firms

Total workers (millions) 2.7 1.5 10.4 5.2

Average family income 30,998 30,182 30,427 28,744

Lowest OOP single premium

1,002 1,095 815 858

% lacking affordable single coverage

8.8 10.7 3.0 3.9

Source: Authors’ calculations using data from the Employer-Sim ModelEstimates are weighted by MEPS-IC worker-level weights. We did not estimate standard errors for point estimates from our simulation model.

Affordability of Single ESI: Workers with Affordability of Single ESI: Workers with MAGI 139%-400% FPL, 2010MAGI 139%-400% FPL, 2010

Full-time, eligible workers with dependents

Within-establishment distribution of family income

All workers

Majority 139-400%

All workers

Majority 139-400%

Small firms Large firms

Total workers (millions) 3.2 1.5 12.1 5.5

Average family income 52,971 51,002 52,798 50,564

Lowest OOP single premium

984 1,111 804 853

% lacking affordable single coverage

2.5 3.0 0.7 0.9

Source: Authors’ calculations using data from the Employer-Sim ModelEstimates are weighted by MEPS-IC worker-level weights. We did not estimate standard errors for point estimates from our simulation model.

Affordability of Dependent ESI: Workers Affordability of Dependent ESI: Workers with MAGI 139%-400% FPL, 2010with MAGI 139%-400% FPL, 2010

Full-time, eligible workers with dependents

Within-establishment distribution of family income

All workers Majority 139-400%

All workers

Majority 139-400%

Small firms Large firms

Percent of workers

Lacking affordable dependent coverage

41.4 42.0 16.6 19.4

Not offered dependent coverage

7.8 8.2 0.4 0.7

Offered but not affordable

33.6 33.8 16.2 18.7

Source: Authors’ calculations using data from the Employer-Sim ModelEstimates are weighted by MEPS-IC worker-level weights. We did not estimate standard errors for point estimates from our simulation model.

Alternative sources of dependent coverage: Alternative sources of dependent coverage: WWorkers with MAGI 139%-400% FPL, 2010orkers with MAGI 139%-400% FPL, 2010

Full-time, eligible workers in small firms with dependents who lack affordable dependent coverage

Within-establishment distribution of family income

All workers Majority 139-400%

All workers

Majority 139-400%

Dependent Cov. Offered Dep. Cov. Not Offered

Percent of workers

Spouse offer** 31.4 33.3 35.0 38.3

Children eligible 32.2 33.9 25.6 26.7

No spouse offer or eligible children

46.6 39.6 45.0 41.1

Source: Authors’ calculations using data from the Employer-Sim ModelEstimates are weighted by MEPS-IC worker-level weights. We did not estimate standard errors for point estimates from our simulation model. **Workers may have both a spousal offer and eligible children, so percentages do not sum to 100%.

LimitationsLimitations

We do not calculate standard errors (SEs).We do not calculate standard errors (SEs).

Appropriate SEs must account for multiple sources of variance:Appropriate SEs must account for multiple sources of variance:

– Matching of MEPS-HC workers to MEPS-IC establishmentsMatching of MEPS-HC workers to MEPS-IC establishments

– Using samples of MEPS-HC workers to estimate summary Using samples of MEPS-HC workers to estimate summary statistics for each establishmentstatistics for each establishment

– Sampling variation in the MEPS-ICSampling variation in the MEPS-IC

Relative standard errors (RSEs) for our point estimates are likely to Relative standard errors (RSEs) for our point estimates are likely to be large. be large.

Additional sources of error are attributable to the HC-IC linkage Additional sources of error are attributable to the HC-IC linkage process.process.

SummarySummary

ACA-related incentives raise important considerations for private ACA-related incentives raise important considerations for private employers regarding the provision of ESI.employers regarding the provision of ESI.– Many establishments have a majority of workers who are income-Many establishments have a majority of workers who are income-

eligible for Medicaid or Exchange coverage.eligible for Medicaid or Exchange coverage.

Within-firm heterogeneity in workers’ incomes complicates Within-firm heterogeneity in workers’ incomes complicates employers’ decisions.employers’ decisions.

Most workers with MAGI 139-400% FPL have access to affordable Most workers with MAGI 139-400% FPL have access to affordable single coverage single coverage – We estimate that about 750,000 workers lacked affordable single We estimate that about 750,000 workers lacked affordable single

coverage in 2010.coverage in 2010.

For those with lack of access to ‘affordable’ dependent coverageFor those with lack of access to ‘affordable’ dependent coverage– Nearly half lacked an alternative source of dependent coverage.Nearly half lacked an alternative source of dependent coverage.

Further WorkFurther Work

Evaluate the affordability of dependent coverage using all Evaluate the affordability of dependent coverage using all available sources:available sources:

– Worker’s ESIWorker’s ESI

– Spouse’s ESISpouse’s ESI

– Children’s eligibility for public insuranceChildren’s eligibility for public insurance

Evaluate workers’ net benefits of Exchange coverage by Evaluate workers’ net benefits of Exchange coverage by comparing costs of moving to the Exchange with the costs of the comparing costs of moving to the Exchange with the costs of the most affordable alternative. most affordable alternative.

Examine the within-establishment concentration of workers who Examine the within-establishment concentration of workers who would benefit from Exchange coverage.would benefit from Exchange coverage.