PATIENT 

PROTECTION AND 

AFFORDABLE CARE 

ACT

Estimates of the 

Effect on the 

Prevalence of 

Employer-Sponsored 

Health Coverage

Report to the Ranking Member, 

Committee on Health, Education, 

Labor, and Pensions, U.S. Senate

July 2012

GAO-12-768

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United States Government Accountability Office

GAO
United States Government Accountability Office

Highlights of GAO-12-768, a report to the 

Ranking Member, Committee on Health, 

Education, Labor, and Pensions, U.S. Senate

July 2012

PATIENT PROTECTION AND AFFORDABLE 

CARE ACT

Estimates of the Effect on the Prevalence of 

Employer-Sponsored Health Coverage

Why GAO Did This Study

The share of employers offering health 

coverage has generally declined in the 

last decade. Researchers believe that 

certain provisions of PPACA could 

affect employers’ future willingness to 

offer health coverage, such as the 

availability of subsidized coverage 

through new health insurance 

marketplaces called “exchanges” and 

an “individual mandate,” which will 

require most people to obtain health 

coverage or pay a tax penalty. Certain 

PPACA provisions are scheduled to 

take effect in 2014. Researchers have 

provided various estimates of the effect 

PPACA may have on employersponsored coverage.

GAO was asked to review the research 

on this topic. GAO examined 

(1) estimates of the effect of PPACA 

on the extent of employer-sponsored 

coverage; (2) factors that may 

contribute to the variation in estimates; 

and (3) how estimates of coverage 

vary by the types of employers and 

employees that may be affected, as 

well as other changes employers may 

be considering to the health benefits 

they offer. GAO reviewed studies 

published from January 1, 2009, 

through March 30, 2012 containing an 

original numerical estimate of the 

prevalence of employer-sponsored 

coverage at the national level. These 

included 5 microsimulation models and 

19 employer surveys. Microsimulation 

models can systematically estimate the 

combined effects of multiple PPACA 

provisions in terms of both gains and 

losses of coverage; their results are 

based on multiple data sets and 

assumptions. Surveys reflect employer 

perspectives; they have limits as a 

predictive tool in part based on varied 

survey methodologies and respondent 

knowledge of PPACA.

What GAO Found

The five studies GAO reviewed that used microsimulation models to estimate the 

effects of the Patient Protection and Affordable Care Act (PPACA) on employersponsored coverage generally predicted little change in prevalence in the near 

term, while results of employer surveys varied more widely. The five 

microsimulation study estimates ranged from a net decrease of 2.5 percent to a 

net increase of 2.7 percent in the total number of individuals with employersponsored coverage within the first 2 years of implementation of key PPACA 

provisions, affecting up to about 4 million individuals. Two of these studies also 

indicated that the majority of individuals losing employer-sponsored coverage 

would transition to other sources of coverage. In contrast to the microsimulation 

studies, which estimate the net effect on individuals, most employer surveys 

measure the percentage of employers that may drop coverage in response to 

PPACA. Among the 19 surveys, 16 reported estimates of employers dropping 

coverage for all employee types. Among these 16, 11 indicated that 10 percent 

or fewer employers were likely to drop coverage in the near term, but estimates 

ranged from 2 to 20 percent. Most surveys were of employers currently offering 

coverage and therefore did not also address whether other employers may begin 

to offer coverage in response to PPACA; however, 3 that did found that between 

1 and 28 percent would begin offering coverage as a result of PPACA. Longerterm predictions of prevalence of employer-sponsored coverage were fewer and 

more uncertain, and four microsimulation studies estimated that from about 

2 million to 6 million fewer individuals would have employer-sponsored coverage 

in the absence of the individual mandate compared to with the mandate. 

Differences in key assumptions and consideration of PPACA provisions likely 

contributed to some variation among estimates from the five microsimulation 

studies and the 16 employer surveys. Variation among the microsimulation 

studies may have stemmed from differences in assumptions about employer and 

employee decision making, the time frames of the estimates, and assessments 

of potential compliance with the individual mandate. Variation among the 

employer surveys may be related to differences in survey sampling techniques, 

the number and types of employer respondents, and the framing of survey 

questions. For example, some surveys used a random sampling methodology, 

allowing their results to be generalized across all employers, while others did not. 

Also, some referred to specific PPACA provisions or provided specific 

information about provisions to respondents, while others did not.

Some of the 19 employer surveys indicated that PPACA may have a larger effect 

on small employers and certain populations and may prompt some employers to 

change benefit designs. For example, 4 surveys found that smaller employers 

were more likely than other employers to stop offering health coverage in 

response to PPACA, and 5 found that employers in general were more likely to 

drop coverage for retirees than for all employees. Nine surveys also indicated 

that employers are considering key changes to benefit design, some of which 

may result in greater employee cost for health coverage. 

GAO provided a draft of this report to two researchers with expertise in employee 

health benefits issues. The experts agreed with GAO’s report and provided 

technical comments, which were incorporated as appropriate.

View GAO-12-768. For more information, 

contact John E.Dicken at (202) 512-7114 or 

dickenj@gao.gov.
Page i GAO-12-768 Employer-Sponsored Coverage under PPACA

Letter 1 

Background 5

Microsimulation Models Predicted Little Near-Term Change in 

Employer-Sponsored Coverage, but Other Studies and Employer 

Surveys Varied More Widely 10

Differences in Key Assumptions and Consideration of PPACA 

Provisions Likely Contributed to Variation in Estimates among 

Studies Using Similar Techniques 18

Employer Surveys Suggest That PPACA May Have a Larger Effect 

on Small Employers and Certain Employee Populations and 

Prompt Some Employers to Change Benefit Designs 25

External Comments 28

Appendix I Studies Reviewed by GAO 30

Appendix II GAO Contact and Staff Acknowledgments 36

Table

Table 1: Employer Survey Results regarding Percentage of 

Employers Likely to Drop Coverage for Employees in the 

Near Term 14

Figures

Figure 1: Microsimulation Model Predictions of Near-Term 

Changes in Employer-Sponsored Coverage as a Result of 

PPACA 11

Figure 2: Effect of PPACA on Employer-Sponsored Coverage with 

and without the Individual Mandate 17

Contents
Page ii GAO-12-768 Employer-Sponsored Coverage under PPACA

Abbreviations

CBO Congressional Budget Office

CDHP Consumer-Directed Health Plan

CMS Centers for Medicare & Medicaid Services 

CPS Current Population Survey

EBRI Employee Benefit Research Institute

EPI Employment Policies Institute

HCERA Health Care and Education Reconciliation Act of 2010

HDHP High Deductible Health Plan

HRET Health Research & Educational Trust

IFEBP International Foundation of Employee Benefit Plans

MBGH Midwest Business Group on Health

MEPS Medical Expenditure Panel Survey

NFIB National Federation of Independent Business

PPACA Patient Protection and Affordable Care Act

RWJF Robert Wood Johnson Foundation

SHOP Small Business Health Options Program

SIPP Survey of Income and Program Participation

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Page 1 GAO-12-768 Employer-Sponsored Coverage under PPACA

United States Government Accountability Office

Washington, DC 20548

July 13, 2012

The Honorable Michael B. Enzi

Ranking Member

Committee on Health, Education, Labor, and Pensions

United States Senate

Dear Senator Enzi:

Employer-sponsored health coverage is the leading source of health 

coverage in the United States and was provided to more than 156 million 

Americans under age 65 (about 59 percent) in 2010.1 Nearly all large 

employers and more than half of small employers offer health coverage to 

their employees, in part as a means of recruiting and retaining 

employees.2 Most employees participate in employer-sponsored 

coverage when it is available,3 in part because employers typically 

subsidize a large share of employees’ premiums, these premium 

contributions are generally excluded from taxable income, and employees 

may lack other affordable health coverage options.4

 

1

See Paul Fronstin, “Sources of Health Insurance and Characteristics of the Uninsured: 

Analysis of the March 2011 Current Population Survey,” Employee Benefit Research 

Institute Issue Brief, no. 362 (2011). 

The proportion of 

employers offering health coverage has declined in the last decade—from 

2

See Kaiser Family Foundation and Health Research & Education Trust (HRET), 

Employer Health Benefits 2011 Annual Survey (Menlo Park, Calif., and Chicago, Ill.: 

September 2011). In this report, large employers are defined as those with 200 or more 

employees, while small employers are those with 3 to 199 employees. 

3

M. W. Stanton and M. K. Rutherford, Employer-Sponsored Health Insurance: Trends in 

Cost and Access, a report prepared for the Agency for Healthcare Research and Quality, 

Research in Action Issue 17, AHRQ Pub. No. 04-0085 (Rockville, Md.: 2004). 

4

Individual health coverage purchased directly through an insurer in the individual market 

is typically more expensive than comparable employer-sponsored coverage. For example, 

the average individual premium for single coverage in 2010 was $2,580 compared to the 

average employee contribution for employer-sponsored single coverage of about $900. 

Further, unlike employer-sponsored coverage, insurers in the individual markets of most 

states may also restrict eligibility for individual coverage based on a person’s health status 

or pre-existing heath conditions.

 
Page 2 GAO-12-768 Employer-Sponsored Coverage under PPACA

68 percent of all employers in 2001 to 60 percent in 2011, with most of 

the decline occurring by 2005.5

The Patient Protection and Affordable Care Act (PPACA), enacted in 

March 2010,6 contains a number of provisions that some researchers of 

employer-sponsored health coverage indicate may affect employers’ 

willingness to offer health coverage to their employees.7

1. estimates of the effect of PPACA on the prevalence of employersponsored health coverage, including the number of individuals 

with employer-sponsored coverage and the proportion of 

employers that would offer coverage to their employees; 

Researchers 

believe some provisions—such as financial penalties that certain 

employers with at least 50 full-time equivalent employees may face if they 

do not offer health coverage or if they offer coverage that does not meet 

certain minimum requirements, and an “individual mandate,” which will 

require most people to obtain health coverage or pay a tax penalty—may 

encourage employers to continue offering or newly offer health coverage. 

However, some researchers believe certain PPACA provisions that result 

in coverage from other sources—such as an expanded Medicaid program 

and subsidized coverage for certain individuals who purchase coverage 

through new health insurance marketplaces called “exchanges”—may 

discourage employers from offering coverage. Recent studies have 

predicted employers’ responses to PPACA in terms of offering coverage 

once key PPACA provisions are in effect. You requested that we review 

existing research on the potential effect of PPACA on the prevalence of 

employer-sponsored coverage. Based on this request, we examined

2. the factors that may contribute to varying estimates; and

3. how estimates vary by the types of employers and employees that 

may be affected, as well as other changes employers may be 

considering to the health benefits they offer.

 

5

See Kaiser Family Foundation and HRET, 2011 Annual Survey. 

6

Pub. L. No. 111-148, 124 Stat. 119 (2010), as amended by the Health Care and 

Education Reconciliation Act of 2010 (HCERA), Pub. L. No. 111-152, 124 Stat. 1029. For 

purposes of this report, references to PPACA include the amendments made by HCERA.

7

Certain PPACA provisions are scheduled to take effect in 2014.
Page 3 GAO-12-768 Employer-Sponsored Coverage under PPACA

To conduct this work, we identified and reviewed 27 studies, published 

from January 1, 2009, through March 30, 2012,8 which fell into three 

broad study types—5 based on microsimulation models,9 3 based on 

other analytic approaches, and 19 based on employer surveys.10 We 

included in our report only those studies from our review that provided an 

original numerical estimate at the national level of the likely prevalence of, 

or changes to, rates of employer-sponsored health coverage as a result 

of PPACA. To identify these studies, we conducted a review of research 

databases using relevant search terms. We also identified studies 

available online from research organizations, consulting firms, and other 

relevant websites. In addition, we included studies that met our criteria 

from a June 2011 report by Avalere Health, a health care consulting firm. 

This report provided a comprehensive review of studies published by that 

time, comparing estimates of the effect of PPACA on employersponsored health coverage.11

 

8

We included studies published during or subsequent to 2009 because key elements of 

PPACA were being considered by Congress at this time.

We also reviewed the bibliographies of the 

selected studies for additional studies that met our criteria. (See app. I for 

a complete list of these studies.)

9

Microsimulation models are statistical models that have been used since the 1950s to 

predict behavioral responses to changes in economic and social policies. They are 

commonly used by government agencies such as the Department of Labor and the 

Congressional Budget Office to model the effects of policies, programs, and proposed 

legislation. The studies we reviewed used models that attempted to predict the behavior of 

employees and employers in response to changes in health policy brought about by 

PPACA. To simulate likely responses, these models rely on a variety of elements, 

including economic theory, national survey data, and existing empirical evidence from 

related or smaller-scale policy changes, such as prior changes in Medicaid eligibility and 

state insurance reform efforts.

10Where authors published more recent studies containing updated estimates from those 

in their prior studies, we primarily cited the most recent estimates. Multiple microsimulation 

studies conducted by the same organization were counted as one study for our purposes 

because they used the same proprietary microsimulation model (despite changing certain 

modeling assumptions and, in some cases, using updated data in more recent studies). 

Similarly, employer surveys conducted by the same firm in multiple years were counted as 

one study because the newer surveys generally updated findings from the previous 

survey. However, we reviewed each of the surveys and microsimulation models for the 

report, and where appropriate, we cite results of older studies that were not updated in 

newer studies.

11See Avalere Health LLC, The Affordable Care Act’s Impact on Employer-Sponsored 

Insurance: A Look At the Microsimulation Models and Other Analyses (Washington, D.C.: 

2011).
Page 4 GAO-12-768 Employer-Sponsored Coverage under PPACA

To examine estimates of the effect of PPACA on the prevalence of 

employer-sponsored health coverage, we summarized information from 

our review of studies. From the microsimulation studies and studies using 

other analytic approaches, we summarized estimates of net changes in 

the number of individuals who may be affected by employers dropping, as 

well as newly offering, coverage as a result of PPACA. We did not 

summarize other changes employers may make to employee 

compensation packages to remain competitive in the labor force, such as 

providing compensation for lost coverage to enable employees to 

purchase coverage elsewhere. From employer surveys, we summarized 

the percentage of surveyed employers likely to drop employer-sponsored 

coverage as a result of PPACA.12 To examine the factors that could 

account for varying estimates, we reviewed the key assumptions and 

methods used in the studies we identified. In particular, to evaluate the 

studies based on microsimulation models and other analytic approaches, 

we examined underlying key assumptions that the studies used when 

modeling employer and employee behavior in making decisions about 

health coverage, as well as assumptions about the effectiveness of 

relevant PPACA provisions and how the provisions might be 

implemented. We examined the authors’ own assessments of their study 

methods as well as publicly available assessments by other researchers. 

To evaluate the employer surveys, we used publicly available information 

about the survey instrument, methodology, sample size, and the 

response rate. Information on employer response rates—which can be an 

important measure of the ability to generalize survey results beyond the 

employers surveyed—was not publicly available for most surveys. We did 

not interview the study authors. To examine how estimates varied by the 

types of employers and employees that may be affected, we summarized 

information from the employer surveys that provided estimates by the 

type of employer and employees. We also summarized other predicted 

changes in employer-sponsored coverage, such as changes in benefit 

design.13

 

12Most employer surveys did not examine the extent to which employers may newly offer 

coverage as a result of PPACA. 

13Most microsimulation studies and studies using other analytic approaches that we 

reviewed did not provide estimates of the prevalence of employer-sponsored coverage by 

type of employer or employee, or estimates of other changes in benefit design.
Page 5 GAO-12-768 Employer-Sponsored Coverage under PPACA

We conducted this performance audit from February 2012 through July 

2012 in accordance with generally accepted government auditing 

standards. Those standards require that we plan and perform the audit to 

obtain sufficient, appropriate evidence to provide a reasonable basis for 

our findings and conclusions based on our audit objectives. We believe 

that the evidence obtained provides a reasonable basis for our findings 

and conclusions based on our audit objectives.

Employer-sponsored health coverage is the leading source of health 

coverage in the United States. In 2010, 59 percent of Americans under 

age 65 received health coverage through employer-sponsored group 

health plans, and an additional 7 percent received coverage through 

health coverage purchased directly from health insurers in the individual 

market.14 Employers may provide coverage either by purchasing 

coverage from a health insurer (fully insured plans) or by funding their 

own health coverage (self-insured plans). Small employers typically offer 

fully insured plans, while large employers are more likely to be selfinsured.15 Small employers are also less likely to offer their employees 

health coverage compared to large employers, citing the cost of coverage 

as a key reason.16

 

14Another 22 percent of Americans under age 65 received coverage through public 

programs such as Medicare and Medicaid, and an additional 19 percent were uninsured. 

Percentages do not sum to 100 because estimates of coverage types are not mutually 

exclusive and individuals can have more than one type of coverage during the year. See 

Fronstin, “Sources of Health Insurance and Characteristics of the Uninsured.” 

Additionally, firms with more high-wage workers are 

more likely to offer coverage to their employees than those with more lowwage workers. Rates of employer-sponsored health coverage have 

declined in the last decade—from 68 percent in 2001 to 60 percent in 

2011. Most of this decline occurred by 2005 and was driven primarily by a 

15Self-insured employee health benefit plans are not subject to state insurance regulations 

or to certain requirements in PPACA that apply to fully insured plans—for example, 

required coverage of certain “essential” health benefits. See 29 U.S.C. § 1144 (certain 

employee benefit plans not subject to state laws); 42 U.S.C. §§ 18021, 18022 (as added 

by Pub. L. No. 111-148, §§ 1301, 1302, 124 Stat. 162,163) (certain employee benefit 

plans excluded from definition of “health plan” and requirement to provide essential health 

benefits under PPACA). 

16In 2011, almost all (99 percent) of large employers (those with 200 or more workers) 

offered health coverage, compared to 59 percent of small employers (those with 3 to 

199 workers). In the small employer category, 48 percent of the smallest employers (those 

with 3 to 9 workers) offered health coverage. See Kaiser Family Foundation and HRET, 

2011 Annual Survey. 

Background 
Page 6 GAO-12-768 Employer-Sponsored Coverage under PPACA

decline in the number of very small employers with three to nine 

employees offering health coverage. In addition, employee participation in 

employer-sponsored coverage has also decreased—from 70 percent in 

2001 to 65 percent in 2011, in part because of a decline in employee 

eligibility for the coverage.17 Further, employees’ share of the cost of 

coverage is increasing faster than employers’ share—the employee 

contribution to the average annual premium for family coverage increased 

131 percent from 2001 to 2011 compared to a 108 percent increase in the 

employer contribution for the same time period.18

PPACA contains a number of provisions that may affect whether 

employers offer health coverage. These provisions include

• an “individual mandate,” or the requirement that individuals—subject 

to certain exceptions—obtain minimum essential health coverage or 

pay a tax penalty starting in 2014;

• the establishment of health insurance exchanges in 2014—

essentially, health insurance marketplaces in which individuals and 

small businesses can compare, select, and purchase health coverage 

from among participating carriers;

• health insurance market reforms including a requirement that prevents 

health plans and insurers in the individual and small group markets 

from denying coverage or charging higher premiums because of preexisting conditions or medical history, and that limits the extent to 

which premiums may vary;19

 

17Employees may not be eligible for employer-sponsored coverage because they work on 

a part-time or temporary basis, or have not completed a required waiting period. Eligible 

employees may choose not to participate for several reasons, including the nonaffordability of the coverage, or because they have coverage through other sources. 

See Paul Fronstin, “Employment-Based Health Benefits: Trends in Access and Coverage 

1997–2010,” Employee Benefit Research Institute Issue Brief, no. 370 (2012).

18See Kaiser Family Foundation and HRET, 2011 Annual Survey. 

19For example, insurers may vary premiums based on factors such as age, but not on 

health status, and the premiums may vary by no more than a 3 to 1 ratio for adults, 

meaning that the rate for the oldest person would be no more than three times higher than 

for the youngest person.
Page 7 GAO-12-768 Employer-Sponsored Coverage under PPACA

• premium subsidies—which provide sliding scale tax credits starting in 

2014 to limit premium costs for individuals and families with incomes 

up to 400 percent of the federal poverty level—for purchasing 

individual coverage through an exchange;

• penalties for certain large employers that do not offer qualified health 

coverage and have at least one full-time employee receiving a 

subsidy (in the form of a premium tax credit or cost-sharing reduction) 

in a plan offered through an exchange starting in 2014, or for certain 

large employers that provide access to coverage but do not meet 

certain requirements for affordability;20

• tax credits for certain small businesses toward a share of their 

employee health coverage beginning in 2010;

• a 40 percent excise tax on certain employer-sponsored health plans 

whose costs exceed a certain threshold in 2018;21 and

• a state Medicaid expansion effective in 2014 for individuals who are 

under 65 years old, have incomes at or below 133 percent of the 

federal poverty level, and meet other specified criteria.22

Researchers have used various types of studies to predict the effect of 

PPACA on employer-sponsored health insurance, including 

microsimulation models, other analytic approaches, and employer 

surveys. Microsimulation models—commonly used statistical models—

generally use published survey data to construct a base data set of 

 

20IRS has proposed establishing a future safe harbor in this context such that the 

threshold would be established at 9.5 percent of an employee’s household income. 

Request for Comments on Health Coverage Affordability Safe Harbor for Employers, 

Treasury Notice 2011-73.

21Threshold amounts in 2018 are $10,200 for single coverage and $27,500 for nonsingle 

coverage. These amounts will be indexed for inflation in subsequent years. See 26 U.S.C. 

§ 4980I, as added by Pub. L. No. 111-148, §§ 9001, 10901, 124 Stat. 847, 1015 and Pub. 

L. No. 111-152, § 1401, 124 Stat. 1059.

22The U.S. Supreme Court has ruled that states may choose not to expand Medicaid 

coverage to this group of individuals and forgo only the federal matching funds associated 

with such expanded coverage. See National Federation of Independent Business, et al., 

vs. Sebelius, Sec. of Health and Human Services, et al., No. 11-393 (U.S. June 28, 2012).

Estimates of Medicaid enrollment used in studies cited in this report were made prior to 

the Supreme Court decision and are therefore likely to assume expanded Medicaid 

participation under PPACA by all states.
Page 8 GAO-12-768 Employer-Sponsored Coverage under PPACA

individuals, families, and employers, and then attempt to predict 

responses to public policy changes by drawing from the best available 

evidence in health economics literature and, in some cases, existing 

empirical evidence from related or smaller-scale policy changes (such as 

prior changes in Medicaid eligibility and state insurance reform efforts). 

The models systematically estimate the combined effect of multiple 

provisions in legislation, such as PPACA, based on this previous research 

and empirical data. For example, with respect to PPACA, models can 

provide an estimate of employer-sponsored coverage that considers both 

the number of employers that may discontinue offering coverage and the 

number that may begin to offer coverage. Models can also incorporate 

into their analyses estimates of the number of employees who may take 

up or refuse offers of such coverage. Model limitations include their 

dependence upon multiple types of data from multiple sources of varying 

quality and that they must rely on many assumptions.23 The impact of 

past policy changes also may not necessarily be predictive of the impact 

of future changes, and there is little information available with which to 

assess the validity of their projections.24

 

23Researchers may include analyses that test the sensitivity of their results to changes in 

various assumptions. 

Studies we reviewed using other 

analytic approaches to model behavior in response to policy changes 

24Some researchers have noted that predictions of employer responses to PPACA in the 

microsimulation studies are generally consistent with employer responses to health care 

reform in Massachusetts that contained certain provisions similar to PPACA, including an 

individual mandate, exchanges, employer penalties, and subsidies for low-income 

individuals. Others suggest that the experience in Massachusetts cannot be generalized 

nationally because of differences between health reform provisions in that state and 

PPACA. For example, employer penalties do not apply to self-insured employers in 

Massachusetts, but they do apply under PPACA. Further, one researcher noted that the 

imposition of employer penalties in Massachusetts (under which employers not offering 

coverage would pay a share of uncompensated care costs for their employees) might 

provide a greater incentive for employers to offer coverage than the employer penalty 

under PPACA. The researcher also noted that because Massachusetts had one of the 

highest rates of insurance coverage in the country prior to the implementation of state 

health reform, its resulting response to health reform may differ from those of other states.
Page 9 GAO-12-768 Employer-Sponsored Coverage under PPACA

varied in their methods, ranging from a cost-benefit comparison to an 

analysis that used survey data and economic theory to predict behavior.25

Employer surveys have also been cited to illustrate the potential impact of 

PPACA on employer health benefits. Unlike microsimulation models, 

surveys have the advantage of reflecting the actual, current perspectives 

of employers, and they can also assess how employers’ behavior may be 

affected by the actions of other employers of similar size and industry.

However, they have limitations as a predictive tool. For example, most 

surveys relating to PPACA asked respondents about employers’ 

likelihood of dropping coverage, rather than the likelihood of newly 

offering coverage as a result of PPACA or the number of employees that 

may take up or refuse such coverage. Thus, they may not illustrate the 

net effect of PPACA on employer-sponsored coverage. Further, the 

validity of their results may be limited by the knowledge of survey 

respondents. Experts have noted that employer surveys tend to be 

answered by human resource officials with varying levels of knowledge 

about PPACA. In addition, researchers note that survey responses do not 

require careful analysis or extensive deliberation and have no 

consequences for the responders. Therefore, surveys are more limited in 

their ability to systematically assess the combined effect of multiple 

PPACA provisions—that is, they cannot ensure that respondents consider 

(or have the ability to consider) all of the relevant provisions when 

deciding how to respond. Moreover, the results of the sample of 

employers surveyed may not always be generalizable to all employers, 

depending on the number of respondents and other aspects of the survey 

methodology.

 

25The analysis that used survey data and economic theory to predict behavior was similar 

in some respects to a microsimulation model. However, its purpose was not to estimate 

the effects of PPACA on employer-sponsored coverage per se, but rather to illustrate how 

these estimates could change under varying assumptions about the cost of health 

insurance. Unlike the microsimulation models, it focused on a subset of the working 

population and did not consider all of PPACA’s provisions.
Page 10 GAO-12-768 Employer-Sponsored Coverage under PPACA

Microsimulation studies generally predicted little change in employersponsored health coverage in the near term, but results of studies using 

other analytic approaches and employer surveys varied more widely. Few 

studies provided longer-term predictions of the prevalence of employersponsored coverage, and those that did so expressed uncertainty about 

their estimates. Microsimulation studies that examined the effect of the 

individual mandate estimated that more people would have employersponsored coverage with the mandate in place compared to without the 

mandate.

Among the five microsimulation studies we reviewed, estimates of 

PPACA’s net effect on changes in the rates of employer-sponsored 

coverage ranged in the near term from a decrease of 2.5 percent to an

increase of 2.7 percent in the number of individuals with coverage.26

 

26We consider effects likely to take place within 2 years of the implementation of a 

provision of PPACA to be in the “near term” and those likely to take place over a longer 

period to be “long term.” Some studies assessed the effects of PPACA as if key provisions 

were implemented in or by a certain year, such as 2011. We consider these studies to be 

examining the near-term effects of PPACA. Other studies assessed the effects of PPACA 

over a range of years, incorporating provision phase-in dates established in the legislation; 

for these studies, we consider the estimates up to 2016 to be near term because key 

provisions are scheduled to take effect in 2014. In each study, predicted changes are 

estimated as compared to a baseline level of coverage in a given year without 

implementation of PPACA.

In 

particular, three projected an increase in the number of individuals with 

coverage. The Centers for Medicare & Medicaid (CMS) estimated a net 

increase of about 0.1 percent (200,000 individuals), and the studies by 

the RAND Corporation (RAND) and the Urban Institute/Robert Wood 

Johnson Foundation (RWJF) each projected a net increase of 2.7 percent 

affecting about 4 million individuals. The remaining two studies projected 

a decrease: the Congressional Budget Office (CBO) projected a 

2.5 percent net decrease affecting about 4 million individuals, while The 

Lewin Group projected a net decrease of 1.6 percent affecting about 

2 million individuals. (See fig. 1.)

Microsimulation 

Models Predicted 

Little Near-Term 

Change in EmployerSponsored Coverage, 

but Other Studies and 

Employer Surveys 

Varied More Widely

Microsimulation Studies 

Predicted Small Near-Term 

Changes to EmployerSponsored Coverage
Page 11 GAO-12-768 Employer-Sponsored Coverage under PPACA

Figure 1: Microsimulation Model Predictions of Near-Term Changes in EmployerSponsored Coverage as a Result of PPACA

Notes: For full citations of studies, see app. I.

Predicted changes are estimated as compared to predicted baseline coverage in a given year without 

PPACA. The estimates are for different time frames: the CBO, CMS, and RAND estimates are for 

2016, and The Lewin Group and Urban Institute/RWJF estimates are for 2011 (assuming 

implementation of key PPACA provisions). Since baseline estimates of coverage without PPACA may

differ between models, the number of individuals with employer-sponsored coverage after 

implementation of PPACA may vary despite similar percentage changes.

Two of the studies also indicated that the majority of individuals who lose 

employer-sponsored coverage would transition to other sources of 

coverage. For example, the RAND study indicated that out of the 

6.5 million individuals it projected to lose employer-sponsored coverage 

after implementation of PPACA, 1.9 million would enroll in individual 
Page 12 GAO-12-768 Employer-Sponsored Coverage under PPACA

coverage through an exchange and 3.5 million would enroll in Medicaid. 

The remaining 1.1 million individuals would become uninsured.27

Estimates from the three studies we reviewed that used other analytic 

approaches varied more widely than those from the microsimulation 

models. Two of the three studies predicted small near-term changes in 

the number of individuals with employer-sponsored coverage. One of the 

studies, published by the Employment Policies Institute (EPI), used a 

modeling approach that predicted behavioral responses of all workers 

in a nationally representative sample to three main provisions of PPACA. 

This study projected a net increase of about 6 percent, or 4 million, in the 

number of individuals with employer-sponsored coverage.28 Another 

study by Booz & Company Inc. that used a combination of surveys, 

interviews, focus groups, and modeling projected a net decrease of 2 to 3 

percent, or from 3 million to 4 million individuals.29 The third study, 

conducted by the American Action Forum, used a decision-making model 

based on cost-benefit comparisons to project a larger decrease of up to 

35 million in the number of people with employer-sponsored coverage.30

However, this study did not consider whether employers may newly offer 

coverage or estimate the number of individuals that would be newly 

covered as a result.

 

27Although this study indicated that 6.5 million individuals would lose employer-sponsored 

coverage after implementation of PPACA, it also found that 10.7 million individuals would 

be newly covered, resulting in a net gain of 4.2 million individuals with employersponsored coverage.

28This estimate was for 2008, assuming that three key PPACA provisions were 

implemented in that year. See R. V. Burkhauser, S. Lyons, and K. Simon, An Offer You 

Can’t Refuse: Estimating the Coverage Effects of the 2010 Affordable Care Act, 

(Washington, D.C.: Employment Policies Institute, July 2011).

29This estimate was for 2016 compared to coverage without PPACA in 2009. See G. D. 

Ahlquist, P. F. Borromeo, and S. B. Saxena, The Future of Health Insurance: Demise of 

Employer-Sponsored Coverage Greatly Exaggerated, Booz & Company Inc. (2011).

30This estimate was for 2014. See D. Holtz-Eakin and C. Smith, Labor Markets and Health 

Care Reform: New Results, American Action Forum (2010).

Estimates from Studies 

Using Other Analytic 

Approaches Varied More 

Widely
Page 13 GAO-12-768 Employer-Sponsored Coverage under PPACA

Employer surveys varied widely in their estimates of employers’ 

responses to PPACA. Sixteen of the 19 surveys we reviewed reported 

estimates of employers dropping coverage for employees in general 

(rather than only for certain types of employees).31 Among these 

16 surveys, 11 indicated that 10 percent or fewer of employers were likely 

to drop coverage in the near term, and 5 indicated that from 11 to 

20 percent were likely to drop coverage in the near term.32 The estimates 

ranged from 2 to 20 percent across these 16 surveys. (See table 1.) 

Because these surveys were typically of employers currently offering 

coverage, most did not reflect the number of employers that may be likely 

to begin offering coverage under PPACA.

 

31We excluded 3 of the 19 total surveys from this analysis. One survey did not include an 

estimate of employers dropping coverage but only provided an estimate of small 

employers newly offering coverage as a result of PPACA. See Kaiser Family Foundation 

and HRET, 2011 Annual Survey. The remaining 2 surveys included estimates only for 

retired, but not all, employees. See Aon Hewitt, Employer Reaction to Health Care 

Reform: Retiree Strategy Survey, 2011 (Lincolnshire, Ill.: 2011), and National Business 

Group on Health, Large Employers’ 2011 Health Plan Design Changes (Washington, 

D.C.: 2010).

32“Likely” responses include employers that stated they were “likely,” “definitely likely,” or 

“very likely” to drop coverage, or were “seriously considering” dropping coverage. For two 

surveys (Benfield Research and International Foundation of Employee Benefit Plans), 

“likely” responses included those “considering” dropping coverage because there was no 

other affirmative response available. Surveys generally specified only near-term time 

frames. One survey did not separate out “likely” from “somewhat likely” responses.

Employer Surveys Varied 

Widely in Their Estimates 

of PPACA’s Effect on 

Employer-Sponsored 

Coverage
Page 14 GAO-12-768 Employer-Sponsored Coverage under PPACA

Table 1: Employer Survey Results regarding Percentage of Employers Likely to Drop Coverage for Employees in the Near 

Term

Organization Size of employers surveyed

Percentage of employers 

likely to drop coverage 

in the near term

National Federation of Independent 

Business

Small (50 or fewer employees) 2 

Towers Watson Midsize and large: from 2,000 to 10,000+ employees 2 

International Foundation of Employee 

Benefit Plans (IFEBP) 

Small and large employers from IFEBP membership: 

employers with annual revenues ranging from less than 

$1 million to over $1 billion

3 

Benfield Research Jumbo (5,000+) employees only 4 

Mercer All sizes: 10+ employees 5 

Willis All sizes. Fewer than 500 employees, 25 percent; 500 to 

4,999 employees, 43 percent; and 5,000+ employees, 

33 percent 

5 

HR Policy Association Large employers (not defined) drawn from the 

organization’s membership 

6 

Midwest Business Group on Health 58 percent were employers with 500+ employees; 

25 percent had 50 to 500 employees

6 

PricewaterhouseCoopers All employers 7 

Market Strategies International All sizes from at least 2 employees 9 

McKinsey & Co. All sizes from <20 employees to >10,000 employees 9 

GfK Custom Research North America N/A 12

Ceridian N/A 19

Lockton Companies N/A 19

Fidelity Investments N/A 20

HighRoads N/A 20

Source: GAO analysis of employer surveys.

Notes: “Likely” responses include employers that stated they were “likely,” “definitely likely,” or “very 

likely” to drop coverage, or were “seriously considering” dropping coverage. For two surveys (Benfield 

Research and IFEBP), “likely” responses included those “considering” dropping coverage because 

there was no other affirmative response available. Near term is defined as generally within 2 years of 

implementation of key PPACA provisions. Surveys are for different time periods.

A higher proportion of employers indicated that they were “somewhat 

likely” to drop coverage, among the 6 surveys that also provided this 

response option.33

 

33The Mercer survey provided a choice of “very likely” and “likely” responses. We included 

the “very likely” response in the count of the 16 surveys in fig. 1, and the “likely” response 

in this count of 6 surveys with “somewhat likely” responses. 

Among these surveys, 2 (the National Federation of 
Page 15 GAO-12-768 Employer-Sponsored Coverage under PPACA

Independent Businesses (NFIB) and Towers Watson) indicated that 

10 percent or fewer of employers were “somewhat likely” to drop 

coverage, 2 surveys (Willis and Mercer) indicated that 11 to 20 percent of 

employers had such plans, and the remaining 2 surveys (McKinsey & Co. 

(McKinsey) and PricewaterhouseCoopers) indicated that over 20 percent 

had such plans. In addition, two surveys asked respondents how their 

decisions to drop or offer coverage may be affected by other employers’ 

actions. In one survey 78 percent of employers indicated that they were 

planning to follow the lead of other employers. In the other survey 

25 percent of employers indicated that it would have a “major impact” on 

their decision if “one or a few large, bellwether employers” or one of their 

major competitors dropped coverage for a majority or all of their 

employees.

Three of the 16 surveys that also examined employer plans to newly offer 

coverage as a result of PPACA indicated that from 1 and 28 percent of 

employers were likely to do so. The NFIB survey indicated that about 

1 percent of the employers surveyed were likely to begin offering 

coverage as a result of PPACA; the McKinsey survey indicated that 

13 percent of employers with 2 to 49 employees, and 14 percent of 

employers with 50 to 499 employees, were likely to begin offering 

coverage. In addition, the Kaiser Family Foundation/Health Research & 

Educational Trust survey that examined employer plans to only newly 

offer (but not drop) coverage indicated that 15 percent of small employers 

(fewer than 50 employees) that did not offer health coverage and were 

aware of the small business tax credit were planning to add coverage as 

a result of it;34 and the Market Strategies International survey indicated 

that 28 percent of employers not offering health coverage would begin to 

do so.

Among the studies we reviewed, only two microsimulation studies 

examined the longer-term effects of PPACA on employer-sponsored 

coverage. CMS projected that the number of individuals with employersponsored coverage would decrease by approximately 1 percent relative 

to estimates without PPACA in each year from 2017 through 2019, and 

that this annual gap would accelerate after that as a result of the high-

 

34GAO recently reported on the use of the small business tax credit under PPACA. See 

GAO, Small Employer Health Tax Credit: Factors Contributing to Low Use and 

Complexity, GAO-12-549 (Washington, D.C.: May 14, 2012).

Estimates of Longer-Term 

Effects of PPACA on 

Employer-Sponsored 

Coverage Were Fewer and 

Less Certain
Page 16 GAO-12-768 Employer-Sponsored Coverage under PPACA

cost plan excise tax. CBO projected a drop of about 3 percent, slightly 

larger than its near-term estimate, in employer-sponsored coverage in 

each year from 2017 through 2019, relative to estimates without PPACA 

in each year, and projected that this annual gap would decrease 

thereafter. The studies also noted that there is a large amount of 

uncertainty regarding how employers and employees will respond to 

policy changes as sweeping and complex as those included in PPACA, 

and some researchers indicated that long-term predictions of the effects 

of PPACA are particularly uncertain.

Four of the five microsimulation studies examined the effect of the 

individual mandate and predicted that fewer individuals would have 

employer-sponsored coverage without the mandate as compared to with 

the mandate. These studies separately estimated the effect of PPACA 

both with and without the individual mandate. The estimates ranged from 

about 2 million to 6 million fewer people covered without the mandate 

compared to with the mandate. (See fig. 2.)

Studies Predicted Larger 

Decreases in EmployerSponsored Coverage 

without the Individual 

Mandate
Page 17 GAO-12-768 Employer-Sponsored Coverage under PPACA

Figure 2: Effect of PPACA on Employer-Sponsored Coverage with and without the 

Individual Mandate

Notes: The CBO estimate of the effect of PPACA with the mandate noted here (-3 million) differs from 

the estimate noted in fig. 1 (-4 million) because CBO’s analysis of the effect of eliminating the 

individual mandate used the agency’s 2010, rather than its 2012, projections, and predicted PPACA’s 

effect in 2021, rather than 2016. In each study, predicted changes are estimated as compared to a 

baseline level of coverage in a given year without implementation of PPACA. The estimates 

presented in this figure are for different time frames: the CBO estimate is for 2021, the RAND 

estimates are for 2016, and The Lewin Group and Urban Institute/RWJF estimates are for 2011 

(assuming implementation of key PPACA provisions).
Page 18 GAO-12-768 Employer-Sponsored Coverage under PPACA

Certain differences in key assumptions may have contributed to some 

variation in the estimates from the microsimulation studies we reviewed. 

Variation in estimates from the studies that used other analytic 

approaches was likely caused in part by differences in their 

methodologies and the extent of their incorporation of PPACA provisions 

into their analyses. Variation in estimates from the employer surveys was 

likely due in part to differences in survey methods, respondents, and the 

manner in which PPACA provisions were referenced throughout the 

survey.

Certain differences in factors, such as underlying assumptions about 

employer and employee decision making, may have contributed to some 

variation in the estimates, although the five microsimulation studies we 

reviewed shared methodological similarities and therefore generated 

relatively similar estimates of changes to employer-sponsored coverage. 

The studies generally used similar modeling techniques and many of the 

same data sets to calculate their estimates. Specifically, to construct 

baseline distributions of coverage in the United States and “synthetic” 

firms intended to reflect the demographics of employees in actual firms, 

the studies relied on data sets such as the Medical Expenditure Panel 

Survey (MEPS), the Current Population Survey (CPS), and the Survey of 

Income and Program Participation (SIPP).35 The studies also made 

certain common assumptions. For instance, most assumed, as illustrated 

by evidence in the literature, that employers electing to drop coverage for 

their employees would increase wages in order to compensate for the 

loss of health benefits, and certain studies noted that the increased 

wages would factor in the tax exclusion of health benefits.36

 

35The MEPS, sponsored by the Agency for Healthcare Research and Quality within the 

U.S. Department of Health and Human Services, is a set of large-scale surveys of families 

and individuals, their medical providers, and their employers across the United States. 

The surveys collect data on the cost and use of health care and health coverage. The 

CPS is sponsored jointly by the U.S. Census Bureau and the U.S. Bureau of Labor 

Statistics and collects data on labor force statistics for the population of the United States, 

including data on employment and earnings. The SIPP is sponsored by the U.S. Census 

Bureau and also collects information about the labor force, including the source and 

amount of income and other demographic data.

However, 

36Experts have noted that if employers choose to stop offering health coverage to their 

employees, they will generally increase employees’ wages to help compensate for the 

loss of benefits and to continue to attract a competitive workforce. 

Differences in Key 

Assumptions and 

Consideration of 

PPACA Provisions 

Likely Contributed to 

Variation in Estimates 

among Studies Using 

Similar Techniques

Differences in 

Assumptions, Time Frames 

of Projections, and 

Assessment of the 

Individual Mandate Likely 

Contributed to Small 

Variation in Estimates 

from Microsimulation 

Studies 
Page 19 GAO-12-768 Employer-Sponsored Coverage under PPACA

another researcher has noted that employers’ decisions to increase 

employees’ wages in lieu of offering health coverage will depend on a 

number of factors—most important the strength of the economy and the 

labor market. Further, most studies assumed that employers generally 

make decisions about health coverage based on their entire workforce 

and would not offer health benefits to some, but not all, employees. For 

example, CBO noted that there are legal and economic obstacles to 

offering health benefits to only certain employees, including a prohibition 

on discrimination in favor of highly compensated individuals.37

However, differences in underlying assumptions about employer and 

employee responses to PPACA, the time frames of projections, and 

assessment of the effectiveness of PPACA’s individual mandate likely 

contributed to some variation in the estimates.

Such 

similar assumptions likely contributed to the consistency of the studies’ 

estimates, which suggested that PPACA would result in relatively small 

changes to employer-sponsored coverage in the near term.

• Modeling employer and employee responses to PPACA: The 

studies generally used one of two different approaches to model 

employer and employee responses to PPACA. The CBO study drew 

from available evidence in health economics literature about historical 

responses to premium changes in order to model the future decisions 

of employers and employees in response to PPACA.38

 

37Congressional Budget Office, CBO and JCT’s Estimates of the Effects of the Affordable 

Care Act on the Number of People Obtaining Employment-Based Health Insurance

(March 2012), 18 (citing 26 U.S.C. § 105(h) and 42 U.S.C. § 300gg-16 (as added by Pub. 

L. No. 111-148, §1001, 124 Stat. 130)).

The RAND 

and Urban Institute/RWJF studies assumed that employers and 

employees would make optimal choices by weighing the financial 

costs and benefits of available options, taking into account factors 

such as the PPACA-imposed individual and employer penalties for not 

38Researchers have referred to this method as an elasticity-based approach. Price 

elasticity is a commonly used economic tool that measures consumers’ sensitivity to price 

changes.
Page 20 GAO-12-768 Employer-Sponsored Coverage under PPACA

obtaining or offering coverage.39 The Lewin Group study used a 

combination of the two approaches.40

• Time frames of the estimates: While each microsimulation model 

estimated the effects of PPACA in a certain year as compared to 

coverage without PPACA in a given year, the models varied in their 

time frame of focus. The Lewin Group and Urban Institute/RWJF 

studies we reviewed simulated the effects of PPACA in 2011 

(assuming implementation of key PPACA provisions). However, the 

RAND study simulated the effects of PPACA in 2016, and the CBO 

and CMS studies simulated the effects of PPACA over a range of 

years (2012 through 2022 and 2010 through 2019, respectively).41

• Compliance with the individual mandate: Models varied in their 

assessment of the degree of compliance with PPACA’s individual 

mandate. The CMS and Urban Institute/RWJF studies assumed 

compliance would be driven by both the financial incentive of a 

penalty as well as the desire to obey a statutory mandate. Similarly, 

the CBO study assumed that compliance with the mandate would be 

high, even among individuals exempt from penalties, because of a 

natural preference for complying with the law. CBO also assumed that 

the penalties for noncompliance may be imperfectly enforced. 

However, the RAND study assumed that penalties for noncompliance 

would be perfectly enforced, but did not assume that the mandate 

 

39This method was referred to as a utility maximization approach.

40Study authors conducted sensitivity analyses to determine how estimates would differ 

under alternate assumptions. For example, CBO’s estimates of the number of people with 

employer-sponsored coverage ranged from a decrease of 20 million to an increase of 

3 million compared to coverage without PPACA under varying assumptions about 

employers’ sensitivity to the cost of health insurance and the effect of the individual 

mandate. CBO indicated that these alternative assumptions about employer behavior 

were unlikely or inconsistent with previous research. Other studies projected smaller 

variations in estimates because of different assumptions. Specifically, the Urban 

Institute/RWJF estimate ranged from a decrease of 0.81 million to a decrease of 

2.1 million because of varying assumptions about the success of the exchanges, and 

RAND found that employer coverage was relatively insensitive to the assumptions it 

tested, including an employer preference for maintaining the status quo (in other words, a 

preference for continuing to offer coverage directly rather than through the exchanges, 

despite financial incentives to make this change).

41Because data were generally adjusted to statistically correspond to studies’ years of 

focus—for example, data in the RAND study were “aged” to reflect projected 2016 

prices—resulting estimates of coverage may differ from studies that focused on other 

years.
Page 21 GAO-12-768 Employer-Sponsored Coverage under PPACA

would increase compliance among individuals exempt from penalties. 

Similarly The Lewin Group also assumed a lower compliance with the 

individual mandate than CBO, in part because there are no legal 

consequences to going without coverage beyond the penalty.

Estimates from the three studies that used other analytic approaches 

varied more widely likely in part because of differences in the studies’ 

methodologies as well as their consideration of PPACA provisions. For 

example, the EPI study, which predicted a net increase of 4 million in the 

number of individuals with employer-sponsored coverage, incorporated 

some of the statistical modeling techniques and underlying theory of 

employer and employee behavior used by the microsimulation models, 

and was therefore able to more systematically examine the combined 

effects of PPACA’s provisions.42 The American Action Forum study, 

which predicted that up to 35 million individuals may lose employersponsored coverage, used a cost-benefit comparison, examining 

individual employers’ financial trade-offs between offering coverage and 

dropping coverage for employees of different income levels and paying 

the employer penalties and increasing employees’ wages to compensate. 

The study suggested that PPACA provides strong financial incentives for 

employers to drop coverage for many of their low-income employees, but 

that there are few incentives to drop coverage for higher-income 

employees. Certain researchers have noted key limitations of the study, 

including that it did not take into account the impact of PPACA’s individual 

mandate, the nonfederal tax advantage of employer-sponsored coverage, 

the cost of single health coverage plans, and the nondiscrimination rules 

that may prevent employers from dropping coverage for some, but not all, 

employees.43

 

42The purpose of this study was not to estimate the effects of PPACA per se, but rather to 

illustrate how these estimates might change under different assumptions about the 

definition of affordability of coverage and the extent of premium cost sharing between 

employers and employees. The study concluded that PPACA would further decrease the 

number of people with employer-sponsored coverage if the definition of affordability of 

coverage (which is currently based on single coverage) was changed to single or family 

coverage as applicable, and if employees were responsible for paying the entire share of 

premium costs.

Additionally, unlike the other two studies, this study did not 

measure the net effect of PPACA on employer health coverage, thus 

43See G. Bowen and M. Buettgens, Employer-Sponsored Insurance Under Health 

Reform: Reports of Its Demise Are Premature, Urban Institute/RWJF (Washington, D.C.: 

2011).

Differences in Study 

Methodologies and 

Consideration of PPACA 

Provisions Likely Led to 

Wider Variation in 

Estimates from Studies 

Using Other Analytic 

Approaches 
Page 22 GAO-12-768 Employer-Sponsored Coverage under PPACA

addressing only those that may drop coverage but not those that may 

newly offer it. Finally, the Booz and Company Inc. study, which predicted 

a net decrease of 3 to 4 million in the number of individuals with 

employer-sponsored coverage, used a combination of interviews, focus 

groups, surveys, and statistical modeling to derive its estimates.44 The 

study estimated the change in employer-sponsored coverage between 

2 years—2009 and 2016—but did not separate the effects of PPACA 

from any changes to employer-sponsored coverage that may occur 

between these years because of factors unrelated to PPACA, such as a 

continuation of the overall declining rates of employer-sponsored 

coverage since the last decade.45

Varying estimates from the 16 employer surveys of the extent to which 

employers were likely to drop health coverage may have stemmed from 

differences in sampling techniques, the response rates and number of 

respondents, the types of employers surveyed, the framing of survey 

questions, and the manner in which PPACA provisions were referenced 

throughout the survey.46

• Sampling techniques and number of respondents: Surveys varied 

in the methodology used to draw their sample of respondents. Some, 

such as the Mercer survey, sampled randomly within the national 

employer population, which helped ensure that results were 

generalizable to all nonsurveyed employers with similar 

characteristics. Others, such as the International Foundation of 

Employee Benefit Plans (IFEBP) survey, used nonrandom sampling 

techniques, which limited the generalizability of their results. In 

addition, the number of survey respondents ranged widely, from 104 

in the Benfield Research survey to about 2,840 in the Mercer survey, 

 

44We could not fully assess the methodology of this study since detailed information was 

not publicly available.

45The EPI study modeled the effects of PPACA as if key provisions were implemented in 

2008. The American Action Forum study simulated employer decisions in 2014, but it was 

unclear whether it drew from predicted coverage levels without PPACA in 2014 or current 

coverage levels at the time of publication to calculate its estimate.

46These differences may prevent estimates from being fully comparable. Additionally, 

because of a lack of publicly available information on the survey instrument and 

methodology for many surveys, we cannot comment on their limitations in more detail.

Variation in Estimates 

from Employer Surveys 

Was Likely Due to 

Differences in Survey 

Methods and Assumptions 

about Respondent 

Knowledge of PPACA 

Provisions
Page 23 GAO-12-768 Employer-Sponsored Coverage under PPACA

which also could have implications for the generalizability of results.47

The surveys generally did not publicly disclose their response rates.

• Employer respondent type: Surveys varied in the type of employers 

surveyed. Some, such as those conducted by trade groups, were 

limited to members of the surveying organization. Others were limited 

to only small or only large employers, or employers within a particular 

industry, or included a broader mix of small, midsize, and large 

employers across all types of industries. For example, the NFIB 

survey included only small employers with 50 or fewer employees, 

while the majority of respondents to the HighRoads survey were from 

hospitals and other health care systems. The Mercer and Willis 

surveys included a wider range of employer sizes and industries. 

Some surveys, such as the Benfield Research survey, included only 

self-insured employers, and others, such as the McKinsey survey, 

included only private sector employers.

• Framing of the survey questions: Surveys varied in the manner in 

which they asked whether employers were planning to drop health 

coverage in response to PPACA. For example, the Fidelity 

Investments (Fidelity) survey reported whether respondents were 

“seriously thinking about no longer offering health care coverage,” the 

HR Policy Association survey asked if respondents were giving 

“serious consideration to discontinuing providing health benefits,” and 

the NFIB survey asked if employers were “not at all likely” or “not too 

likely” to “have an employee insurance plan 12 months from now.” In 

addition, some surveys reported specifically about active employee 

health plans, while others did not distinguish between active 

employees and retirees. For example, the Towers Watson survey 

reported whether respondents planned to “replace health care plans 

for active employees working 30+ hours per week with a financial 

subsidy” while the GfK Custom Research North America survey 

reported whether employers were “very or somewhat likely to drop 

coverage” without specifying whether this was for active employees or 

retirees.48

 

47Surveys with a greater number of respondents are generally considered to be more 

generalizable than surveys with fewer respondents.

48Although we considered these questions similar for the purposes of our analysis, they 

may elicit different responses even if presented to the same respondents.
Page 24 GAO-12-768 Employer-Sponsored Coverage under PPACA

• Referencing of PPACA provisions: Surveys varied in their 

assumptions of respondent knowledge of PPACA provisions. For 

example, 11 surveys assumed a certain level of respondent 

awareness of key PPACA provisions and did not specifically refer to 

the provisions in the phrasing of their questions about plans to drop 

coverage. However, other surveys phrased their questions in the 

context of specific PPACA provisions or explicitly asked respondents 

about their knowledge of the provisions. For example, the 

PricewaterhouseCoopers survey asked how likely respondents were 

to “cover employees through state-run health insurance exchange 

pools,” and the Willis survey asked how likely respondents were to 

“drop coverage to trigger migration of employees to state-based 

exchanges.” The McKinsey survey also phrased its questions about 

discontinuing health coverage in the context of select PPACA 

provisions and provided additional information to respondents to 

inform them about the provisions.49

 

49The McKinsey survey included three questions relating to employer plans for dropping 

or retaining coverage in light of the enhanced availability of coverage through the small 

business and individual market insurance exchanges. The first question, directed at 

respondents with 1 to 99 employees, noted the availability of Small Business Health 

Options Programs (SHOPs)— exchanges where small businesses may purchase health 

care for their employees. The respondent was then asked about the likelihood of the 

employer’s continuing to offer or newly offering coverage assuming that “SHOPs become 

an easy, affordable way for small businesses to obtain coverage for their employees.” The 

other two questions provided information about the availability of coverage through the 

individual exchanges, and respondents were asked: “Assume exchanges become an easy 

and affordable way for individuals to obtain health insurance. Given this information, how 

likely do you think your company would be to discontinue employee health coverage?” 

One researcher pointed out that these were “significant assumptions,” and others have 

pointed out methodological flaws in McKinsey’s survey design. McKinsey noted that its 

survey captured employer attitudes and was not intended to be a predictive economic 

analysis of the effect of PPACA.
Page 25 GAO-12-768 Employer-Sponsored Coverage under PPACA

PPACA may affect certain types of employers or employers with certain 

employee populations more than all employers or employees. Some 

employers were considering benefit design changes.

Four of five surveys that examined changes in the prevalence of 

employer-sponsored coverage by employer size indicated that a greater 

share of small employers (from 5 to 22 percent) were considering 

dropping coverage compared to large employers (from 2 to 14 percent) in 

these surveys.50,51 These surveys included Fidelity (22 percent and 

14 percent for small and large employers, respectively), McKinsey 

(9 percent and 5 percent for small and large employers, respectively), and 

Mercer (5 percent and 2 percent for small and large employers, 

respectively). One survey (Willis) did not indicate any differences between 

small and large employers.52,53

 

50Two of the microsimulation studies noted that small employers and those with 

predominantly low-wage workers would be more likely to drop employer-sponsored 

coverage than large employers; however, no numerical estimates were published.

51The definitions of “small” and “large” employers varied or were not clearly provided in 

these surveys. 

52Other surveys may have included this question; however, the information was not 

publicly available.

53One survey that examined changes in coverage by employer size—McKinsey—also 

estimated that about 13 percent of small employers would begin, or continue, to offer 

coverage through the exchanges. 

Employer Surveys 

Suggest That PPACA 

May Have a Larger 

Effect on Small 

Employers and 

Certain Employee 

Populations and 

Prompt Some 

Employers to Change 

Benefit Designs

PPACA May Affect Small 

Employers and Certain 

Types of Employees More 

Than Others
Page 26 GAO-12-768 Employer-Sponsored Coverage under PPACA

Surveys that examined changes in the prevalence of employer-sponsored 

coverage for certain types of beneficiaries indicated that these individuals 

could be more affected than others. Five of the nine surveys that 

considered the effect on retirees indicated that a higher proportion of 

employers were considering dropping coverage for retirees compared to 

all employees in these surveys—between 9 and 20 percent compared to 

4 percent and 9 percent, respectively.54,55,56 For example, Mercer 

indicated that 17 percent and 5 percent of employers were considering 

dropping coverage for new retirees and all employees, respectively, and 

Willis indicated that 9 percent and 5 percent of employers were 

considering dropping coverage for retirees and all employees, 

respectively. Two of the four remaining surveys 

(PricewaterhouseCoopers and IFEBP) indicated no differences between 

rates of employers dropping coverage for retirees and for all employees, 

and the remaining two only examined the effect of PPACA on subsets of 

employees, but not all employees. In addition, two surveys that examined 

the effect of PPACA on spouses and dependents indicated that between 

12 and 15 percent of employers were considering dropping health 

coverage for spouses and dependents compared to a lower proportion for 

all employees. For example, McKinsey indicated that 15 percent and 

9 percent of employers were definitely considering dropping coverage for 

spouses/dependents and all employees, respectively.

 

54The proportion of employers considering dropping coverage was slightly lower for pre-65 

retirees compared to post-65 retirees in two surveys and somewhat higher for future 

retirees compared to current retirees in one survey.

55Of the remaining four surveys, two showed virtually no difference in rates of employers 

dropping coverage for retirees and other types of employees, and the remaining two 

examined rates for retirees but not all employees. 

56The microsimulation studies focused on active employees and their dependents, and did 

not examine the effect of PPACA on retirees. 
Page 27 GAO-12-768 Employer-Sponsored Coverage under PPACA

Several of the 19 employer surveys that we reviewed also indicated that 

PPACA may prompt employers to consider key changes to benefit 

designs that will generally result in greater employee cost for health 

insurance.57

• Increased employee cost sharing: The 9 surveys that examined

benefit design changes indicated that from 16 to 73 percent of 

employers were considering increasing employees’ share of the cost 

of coverage, for example, through increased premiums, deductibles, 

or co-payments. For example, the IFEBP survey indicated that about 

40 percent of employers had increased or were planning to increase 

employee premium sharing, and about 29 percent had increased or 

planned on increasing in-network deductibles. Similarly, the 

PricewaterhouseCoopers survey indicated that 61 percent planned to 

increase employee premium sharing, and 57 percent planned to 

increase employee cost sharing through other benefit design 

changes.

In addition, the 7 surveys that examined employer responses to the 

high-cost excise tax effective under PPACA in 2018 indicated that 

from 11 to 88 percent of employers had plans to take steps to avoid 

paying the tax; in 5 of these surveys, employers planned to redesign 

benefits and in 2 surveys employers had not identified specific 

strategies but planned to take steps. For example, the Aon-Hewitt 

survey indicated that 25 percent of employers anticipated changing 

their benefits to reduce plan cost, while the Willis survey indicated that 

22 percent planned to increase deductibles or co-payments to avoid 

the tax.

• Use of account-based plans: The 9 surveys that examined employer 

plans to offer account based plans, such as high-deductible health 

plans (HDHP), consumer-directed health plans (CDHP), or health 

savings accounts indicated that from 17 to 73 percent of employers 

either had plans to offer such plans or saw the plans as attractive 

options for providing health coverage. For example, the Benfield 

Research survey indicated that about two-thirds of employers planned 

 

57Several trends in employer-sponsored coverage predate PPACA, including increases in 

the employee share of health plan premiums and cost sharing and increases in the 

prevalence of account-based health plans. See Kaiser Family Foundation and HRET, 

2011 Annual Survey. 

PPACA May Also Prompt 

Employers to Change 

Health Plan Benefit Design
Page 28 GAO-12-768 Employer-Sponsored Coverage under PPACA

to offer a CDHP by 2015, and the Towers Watson survey indicated 

that 17 percent planned to start offering HDHPs in 2013 or 2014, 

bringing the total share of employers with HDHPs up to 74 percent.

• Move to self-insurance: Two of the 3 surveys that examined 

employers potentially becoming self-insured in response to PPACA 

indicated that from 12 to 52 percent were considering doing so, and 

the remaining survey indicated that 13 percent of employers reported 

increasing their consideration of such a move in response to 

PPACA.58 For example, the IFEBP survey indicated that about 

52 percent of employers were considering such a move, compared to 

only about 6 percent in a prior year’s survey.

We provided a draft of this report to two researchers with expertise in 

employee health benefits issues. They agreed with our report and 

provided suggestions and technical comments, which we incorporated as 

appropriate.

As agreed with your office, unless you publicly announce the contents of 

this report earlier, we plan no further distribution until 30 days from the 

report date. At that time, we will send a copy to the Secretary of Health 

and Human Services. In addition, the report will be available at no charge 

on the GAO website at http://www.gao.gov. 

 

58Self-insured employee health benefit plans are not subject to state insurance regulations 

or to certain requirements in PPACA that apply to fully insured plans—for example, 

required coverage of certain “essential” health benefits. See 29 U.S.C. § 1144 (certain 

employee benefit plans not subject to state laws); 42 U.S.C. §§ 18021, 18022 (as added 

by Pub. L. No. 111-148, §§ 1301, 1302, 124 Stat. 162,163) (certain employee benefit 

plans excluded from definition of “health plan” and requirement to provide essential health 

benefits under PPACA). Some researchers have raised concerns that employers with 

healthier employees are more likely to become self-insured, thereby leaving the 

exchanges—particularly for the small group market—with relatively sicker enrollees, and 

thereby driving up premiums in the exchanges.

External Comments
Page 29 GAO-12-768 Employer-Sponsored Coverage under PPACA

If you or your staff have any questions about this report, please contact 

me at (202) 512-7114 or dickenj@gao.gov. Contact points for our Offices 

of Congressional Relations and Public Affairs may be found on the last 

page of this report. GAO staff who made key contributions to this report 

are listed in appendix II.

Sincerely yours,

John E. Dicken

Director, Health Care
Appendix I: Studies Reviewed by GAO

Page 30 GAO-12-768 Employer-Sponsored Coverage under PPACA

We reviewed the 27 studies listed below that contained original numerical 

estimates of the effect of the Patient Protection and Affordable Care Act 

(PPACA) on the prevalence of employer-sponsored coverage1

—5 based 

on microsimulation models,2 3 based on other analytic approaches, and 

19 based on employer surveys.3

1. Centers for Medicare & Medicaid Services. 

Foster, R. S., Centers for Medicare & Medicaid Services Office of the 

Actuary. Estimated Financial Effects of the “Patient Protection and 

Affordable Care Act,” as Amended. Baltimore, Md.: April 2010.

2. Congressional Budget Office (CBO). 

CBO and JCT’s Estimates of the Effects of the Affordable Care Act on 

the Number of People Obtaining Employment-Based Health 

Insurance. Washington, D.C.: March 2012.

Updated Estimates for the Insurance Coverage Provisions of the 

Affordable Care Act. Washington, D.C.: March 2012.

Banthin, J. Effects of Eliminating the Individual Mandate to Obtain 

Health Insurance. Presentation at Bloomberg Government/Rand 

Corporation event. Washington, D.C.: March 2012.

Elmendorf, D. W. CBO’s Analysis of the Major Health Care Legislation 

Enacted in March 2010. Testimony before the Subcommittee on 

Health, Committee on Energy and Commerce, House of 

Representatives. Washington, D.C.: March 2011.

 

1

We reviewed studies published from January 1, 2009, through March 30, 2012, that 

provided an original numerical estimate at the national level of the prevalence of, or 

changes to, rates of employer-sponsored coverage. 

2

Multiple microsimulation studies conducted by the same organization were counted as 

one study for our purposes because they used the same proprietary microsimulation 

model.

3

Employer surveys conducted by the same firm in multiple years were counted as one 

study for our purposes because the newer surveys generally updated relevant findings 

from the previous surveys. The full text of certain surveys was not publicly available; in 

these cases, we cite the press releases we reviewed that contained the surveys’ findings.

Appendix I: Studies Reviewed by GAO

Microsimulation 

Models 
Appendix I: Studies Reviewed by GAO

Page 31 GAO-12-768 Employer-Sponsored Coverage under PPACA

H.R. 4872, Reconciliation Act of 2010 (Final Health Care Legislation). 

Washington, D.C.: March 2010.

3. The Lewin Group. 

Sheils, J. F. and R. Haught. “Without the Individual Mandate, the 

Affordable Care Act Would Still Cover 23 Million; Premiums Would 

Rise Less Than Predicted.” Health Affairs, vol. 30, no. 11 (2011).4

Patient Protection and Affordable Care Act (PPACA): Long Term 

Costs for Governments, Employers, Families and Providers. Staff 

Working Paper # 11. Falls Church, Va.: 2010.

4. RAND Corporation. 

Eibner, C. and C. C. Price. The Effect of the Affordable Care Act on 

Enrollment and Premiums, With and Without the Individual Mandate. 

Santa Monica, Calif.: 2012.

Eibner, C. et al. Establishing State Health Insurance Exchanges: 

Implications for Health Insurance Enrollment, Spending, and Small 

Business. Santa Monica, Calif.: 2010.

5. The Urban Institute/Robert Wood Johnson Foundation. 

Buettgens, M. and C. Carroll. Eliminating the Individual Mandate: 

Effects on Premiums Coverage, and Uncompensated Care. 

Washington, D.C., and Princeton, N.J.: January 2012.

Garrett, B. and M. Buettgens. Employer-Sponsored Insurance under 

Health Reform: Reports of Its Demise Are Premature. Washington, 

D.C., and Princeton, N.J.: January 2011.

 

4

The authors of this study are staff members of The Lewin Group, and the study was 

conducted using The Lewin Group’s proprietary microsimulation model. We therefore 

consider it to be a study by The Lewin Group for our purposes.
Appendix I: Studies Reviewed by GAO

Page 32 GAO-12-768 Employer-Sponsored Coverage under PPACA

6. Ahlquist, G. D., P. F. Borromeo, and S. B. Saxena. The Future of 

Health Insurance: Demise of Employer-Sponsored Coverage Greatly 

Exaggerated. Booz & Company Inc. 2011.

7. Burkhauser, R. V., S. Lyons, and K. Simon. An Offer You Can’t 

Refuse: Estimating the Coverage Efffects of the 2010 Affordable Care 

Act. Washington, D.C.: Employment Policies Institute, July 2011.

Burkhauser, R. V., S. Lyons, and K. Simon. The Importance of the 

Meaning and Measurement of “Affordable” in the Affordable Care Act. 

Working Paper # 17279, National Bureau of Economic Research. 

Cambridge, Mass.: August 2011.

8. Holtz-Eakin, D. and C. Smith. Labor Markets and Health Care Reform: 

New Results. American Action Forum. Washington, D.C.: May 2010.

9. Aon Hewitt. Employer Reaction to Health Care Reform: Retiree 

Strategy Survey. Lincolnshire, Ill.: 2011.

10. Benfield Research. Special Report: Employer Market Healthcare 

Reform Research Summary. St. Louis, Mo.: 2011.

11. Ceridian Health Care Compass. “Health Care Reform Presents New 

Challenges, Choices to U.S. Employers.” Issue 21. Cites findings from 

Ceridian’s Health Care Compass reader poll, July 2011. Accessed 

February 1, 2012. 

http://www.ceridian.com/employee_benefits_article/1,6266,15766-

79463,00.html. 

12. Fidelity Investments. Fidelity Investments Survey Finds Majority of 

Employers Rethinking Health Care Strategy Post Health Care Reform. 

Boston, Mass.: July 2010. Accessed March 6, 2012. 

http://www.fidelity.com/inside-fidelity/employer-services/fidelitysurvey-finds-majority-of-employers-rethinking-health-care-strategypost-health-care-reform. 

13. GfK Custom Research North America. Employers Skeptical of Health 

Reform, But Few Project Dropping Health Insurance Coverage.” New 

York, N.Y.: December 2011. Accessed March 29, 2012. 

http://www.gfkamerica.com/newsroom/press_releases/single_sites/00

9103/index.en.html. 

Other Analytic 

Approaches 

Employer Surveys
Appendix I: Studies Reviewed by GAO

Page 33 GAO-12-768 Employer-Sponsored Coverage under PPACA

14. HighRoads. “HighRoads Study Shows Employers Will Not Eliminate 

Benefits Coverage Due to Health Care Reform.” December 2011. 

Accessed February 1, 2012. http://newsroom.highroads.com/hrcompliance-connection/highroads-study-shows-employers-will-noteliminate-benefits-coverage-due-to-health-care-reform. 

15. HR Policy Association.

2011 Annual Chief Human Resource Officer Survey. Washington, 

D.C.

2010 Summer Chief Human Resource Officer Survey: Questions on 

the New Health Care Law. Washington, D.C.

16. International Foundation of Employee Benefit Plans.

Health Care Reform: Employer Actions One Year Later; Survey 

Results: May 2011. Brookfield, Wis.: 2011.

Health Care Reform: What Employers Are Considering; Survey 

Results: May 2010. Brookfield, Wis.: 2010.

17. Kaiser Family Foundation and Health Research & Education Trust. 

Employer Health Benefits 2011 Annual Survey. Menlo Park, Calif., 

and Chicago, Ill.: September 2011.

18. Lockton Companies, LLC. Employer Health Reform Survey Results, 

June 2011. Kansas City, Mo.: 2011.

19. Market Strategies International. Many Companies Intend to Drop 

Employer Coverage in 2014 as Health Care Reform Takes Full Effect. 

Livonia, Mich.: January 2011. Accessed May 1, 2012. 

http://www.marketstrategies.com/news/1902/1/Many-CompaniesIntend-to-Drop-Employee-Coverage-in-2014-as-Health-Care-ReformTakes-Full-Effect.aspx. 

20. McKinsey & Company. How US Health Care Reform Will Affect 

Employee Benefits. 2011.
Appendix I: Studies Reviewed by GAO

Page 34 GAO-12-768 Employer-Sponsored Coverage under PPACA

21. Mercer, LLC.

National Survey of Employer-Sponsored Health Plans: 2011 Survey 

Report. New York, N.Y.: 2012.

National Survey of Employer-Sponsored Health Plans: 2010 Survey 

Report. New York, N.Y.: 2011.

22. Midwest Business Group on Health. Financial Impact of Health 

Reform on Employer Benefits Not as Significant as Anticipated. 

Chicago, Ill.: March 2012. Accessed March 29, 2012. 

http://www.mbgh.org/mbgh/news/2012pressreleases/go.aspx?navigati

onkey=a4956928-cca2-495a-94fc-ed56ce991fcd. 

23. National Business Group on Health. 

Large Employers’ 2011 Health Plan Design Changes. Washington, 

D.C.: 2010.

Majority of Employers Revamping Health Benefit Programs for 2012, 

National Business Group on Health Survey Finds. Washington, D.C.: 

August 2011. Accessed January 1, 2012. 

http://www.wbgh.org/pressrelease.cfm?ID=179. 

24. National Federation of Independent Business. Small Business and 

Health Insurance: One Year After Enactment of PPACA. Washington, 

D.C.: 2011.

25. PricewaterhouseCoopers LLP. Health and Well-Being Touchstone 

Survey Results, May 2011. New York, N.Y.: May 2011.

26. Towers Watson.

Health Care Changes Ahead: Survey Report. New York, N.Y.: 

October 2011.

Health Care Reform: Looming Fears Mask Unprecedented Employer 

Opportunities To Mitigate Costs, Risk, and Reset Total Rewards. New 

York, N.Y.: May 2010.
Appendix I: Studies Reviewed by GAO

Page 35 GAO-12-768 Employer-Sponsored Coverage under PPACA

27. Willis Group Holdings plc.

Willis. The Health Care Reform Survey, 2011-2012. New York, N.Y.: 

2011-2012.

Diamond Management Technology Consultants and Willis North 

America. The Health Care Reform Survey, 2010. New York, N.Y.: 

2010.
Appendix II: GAO Contact and Staff 

Acknowledgments

Page 36 GAO-12-768 Employer-Sponsored Coverage under PPACA

John E. Dicken, (202) 512-7114 or dickenj@gao.gov

In addition to the contact named above, Randy DiRosa (Assistant 

Director), Iola D’Souza, Yesook Merrill, Laurie Pachter, and Priyanka 

Sethi made key contributions to this report.

Appendix II: GAO Contact and Staff 

Acknowledgments 

GAO Contact 

Staff 

Acknowledgments 

(291020)
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