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. 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 self- insured. 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. Additionally, firms with more high-wage workers are more likely to offer coverage to their employees than those with more low- wage 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 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. 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. 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 pre- existing conditions or medical history, and that limits the extent to which premiums may vary; 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; 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; 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. 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 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. 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.analytic approaches to model behavior in response to policy changes Studies we reviewed using other varied in their methods, ranging from a cost-benefit comparison to an analysis that used survey data and economic theory to predict behavior. 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. Microsimulation studies generally predicted little change in employer- sponsored 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 employer- sponsored 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 employer- sponsored 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 In increase of 2.7 percent in the number of individuals with coverage.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.) 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 coverage through an exchange and 3.5 million would enroll in Medicaid. The remaining 1.1 million individuals would become uninsured. 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. 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. 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. 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. 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). 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. 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. A higher proportion of employers indicated that they were “somewhat likely” to drop coverage, among the 6 surveys that also provided this response option.