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Study: Costs Rise for Mid-Size Firms Under Health Care Law but Not Small Ones

By CQ Staff

October 9, 2012 -- Middle-sized businesses likely will face higher costs under the health care law because more employers in that group will be required to provide insurance coverage. But costs per employee will go down for small businesses, according to an Urban Institute analysis.

The analysis, released last week, drew on several previous institute analyses and used the think tank's Health Insurance Policy Simulation Model to draw conclusions.

It found that under the health care law (PL 111-148 PL 111-152):

  • For mid-size businesses, those with 100 to 1,000 workers, costs per worker will increase. That reflects the penalties that as many as 5 percent of those employers will have to pay because they don't provide insurance coverage. Expanded enrollment of workers in health care plans is the main reason why costs would go up 9.5 percent overall for this group, the Urban Institute said.
  • For small businesses, meaning those with fewer than 50 workers, average costs per insured worker will be reduced by 7.3 percent and spending for the group overall will decrease by 1.4 percent. Such businesses are exempt from penalties and may qualify for premium tax credits.
  • The cost per employee will be virtually unchanged for large employers—those with more than 1,000 workers—who provide group insurance coverage. "Our analysis shows these employers already cover the vast majority of their employees, will continue to do so, and will retain the flexibility to define their own benefits," the Institute said. Overall costs are projected to rise by 4.3 percent due to more employees signing up for coverage due to the individual mandate.

 Urban Institute Report (PDF)

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