Californians with Employer-Sponsored Insurance would Lose Protections under ACA Repeal

Rachel Siemonsand Laurel Lucia

Millions of Californians would lose Medi-Cal coverage and Covered California subsidies under repeal of the Affordable Care Act (ACA), as described in our previous research. However, it is not as widely understood that Californians covered by employer-sponsored insurance (ESI), the main source of health insurance for those under age 65, would also lose important protections under ACA repeal.

Some Republican proposals to replace the ACA could result in there being fewer workers with job-based coverage. Benefit levels could also decline, depending on how Republican proposals change the tax treatment of ESI. These impacts to ESI will be a focus of our future research as more details on Republican proposals are revealed.

For now, we highlight in this blog post some of the most significant and immediate effects that full repeal would have on the 16.2 million non-elderly Californians with ESI, who make up roughly half of the state’s workforce, according to the California Health Interview Survey 2015. While some Republicans have expressed support for preserving certain ACA provisions, there is no consensus among Congressional Republicans on what ACA repeal should include; for this reason, we address in this post what workers and their families stand to lose under full repeal. (The House Republicans’ recent policy brief is silent on most of the plan standards discussed in this post.)

ACA Provides Affordable Coverage Options to Fall Back On

Workers who lost health insurance due to job change or loss prior to the ACA were left with limited coverage options aside from COBRA, which was too costly for many. A major goal of the ACA was to ensure that those who lost ESI had affordable health coverage options available, including expanded Medicaid (Medi-Cal in California) and, depending on income, subsidized insurance through health benefit exchanges (Covered California in this state). A national study looking at coverage transitions between 2010 and 2013 found that over that three-year period, 40% of employees with ESI and 48% of their dependents experienced a coverage change from their initial employer plan. The study found that approximately one-quarter of these previously-insured adults and one-fifth of their dependents became uninsured, demonstrating the need for affordable options.

Prior to the ACA, many workers stayed in jobs that were not well-matched to their skills and interests in order to maintain health coverage for themselves and their families. Job lock, as this situation is called, limits workers’ mobility and reduces workers’ opportunities for advancement and entrepreneurship. By enabling low- and middle-income workers to access affordable insurance options when they change jobs, the ACA has also given many workers flexibility to choose how and where they’re employed. In addition, the ACA was predicted to make it easier for Californians to become self-employed.

Provides Young Adults Opportunity to be on Parents’ Plan

Young adults make up one of the groups with the largest gains in coverage under the ACA in California — one in four (25%)  young adults ages 21 through 24 was uninsured in 2013, compared to fewer than one in eight (12%) in 2015. Not only did the ACA expand access to Medi-Cal and subsidized Covered California plans for many young adults, but it also required plans to allow young adults to stay on their parents’ health insurance until they reach age 26. This applies even if the children are married, financially independent, or live in another state. As of 2013, 294,000 young adults in California gained coverage under a parent’s plan. While the House Republicans’ policy brief on ACA repeal and replace implies that they would maintain the requirement that plans offer such coverage, Secretary of Health and Human Services Tom Price’s plan would repeal it.

Prohibits Insurers from Capping Benefits

In 2010, 40% of California workers with ESI were enrolled in a plan with lifetime benefit maximums. While most California workers did not reach their coverage limit, consequences were severe for those who did, including loss of coverage, medical debt, and bankruptcy. The ACA eliminated annual and lifetime coverage limits from all health insurance plans, including ESI. Reinstatement of these limits as part of ACA repeal would be particularly onerous for some of the estimated 32% of Californians with job-based coverage who have chronic conditions. Workers who reach their benefit limits may be compelled to find a new job for the sole purpose of getting coverage under a new insurance plan.

Sets Cap on Out-of-Pocket Costs

The ACA restricts the amount that those insured by all health plans, including ESI, could be required to pay each year in deductibles, copayments, or coinsurance. As of 2017, the maximum out-of-pocket-limit is $7,150 for individuals and $14,300 for families, though many plans set lower limits. Once this limit is reached, all care is covered by the insurer without additional enrollee payments. Only a small fraction of those enrolled in ESI incur costs approaching these maximum limits, but this cap on out-of-pocket costs is an important protection for those with high healthcare expenses. While many of the families that incur high healthcare expenses likely struggle to pay out-of-pocket costs even with these maximum limits, before passage of the ACA in 2010, researchers estimated that between 19% and 23% of California workers with ESI had an out-of-pocket limit even higher than those limits required by the ACA.

Eliminates Charges for Certain Preventive Services

According to the Centers for Disease Control and Prevention (CDC), those offered preventive health care without an out-of-pocket cost, including copayments and deductibles, are more likely to use those services, and this reduces the likelihood of delayed care and serious illness in the future. To encourage people to seek preventive care, the ACA requires non-grandfathered health plans to eliminate copayments and deductibles for preventive health services, such as routine immunizations, cancer screenings, prenatal care, and family planning. In 2015, 15.9 million Californians, a majority of whom had ESI, benefitted from the removal of cost sharing for preventive health services. Reinstating cost sharing for preventive services would increase health care expenses for workers and their families and in some cases deter workers’ use of needed care.

While Californians who rely on the Medi-Cal expansion and subsidies through Covered California generally have the most to lose under ACA repeal, workers with ESI and their family members would lose important protections they gained under health reform. ACA repeal would not only reduce workers’ affordable coverage options when they lose or change jobs, but it could also result in higher health care costs and reduced access to care for many Californians who continue to rely on ESI.