Employees shouldn’t fear shift to exchanges — yet

Employees shouldn’t fear shift to exchanges — yet

The Morning Consult discusses a poll today on people’s views of the Patient Protection and Affordable Care Act. It looks like people are moderately afraid of “employer dumping” — employers terminating benefits and forcing employees to buy insurance policies on the exchanges. Most of them seem to think that this would have a somewhat or very negative impact on their coverage and experience. Unsurprisingly, this breaks down strongly along partisan lines: Republicans are most likely to think PPACA will negatively affect them, Democrats the least.

See also: Workers fret getting shifted to exchanges

But how likely is this? There are all sorts of estimates out there, but all of them are barely one step above a wild guess. We’ve never done anything like this before, so how do we know how employers will react? But there’s one thing worth noting: If you believe the poll, the very strength of the negative expectations probably makes employers less likely to do this.

After all, why do employers offer insurance in the first place? Yes, yes: tax arbitrage. Wages are taxable to employees, while fringe benefits aren’t, so you can offer higher overall compensation by substituting benefits for wages.

But that’s also true of luxuriously appointed offices. Yet relatively few employers have chosen to provide everyone a cavernous office with a luxe couch and a wine fridge. A lot of employers, on the other hand, provide luxe health benefits. The difference is that employees value the health benefits highly enough to trade off a lot of wages for them. For all the talk about how people are insulated from the cost of their insurance, if you follow union negotiations, you’ll know that when it comes to making explicit trade-offs between more expensive benefits and higher wages, the union representatives very frequently choose the benefits.

See also: Shift to public exchanges could save employers $3 trillion

That suggests that as long as employees are afraid of the exchanges, employers are going to be reluctant to force them there. This effect will probably be weakest at the low end, where the workforce is already struggling to find and keep jobs, but among middle-class people with relatively secure employment, I’d expect relatively little dumping in the near- to medium-term.

Eventually, of course, there may be a tipping point. If one big employer in your industry dumps, others may have to follow in short order to remain cost-competitive. And the more companies that dump, the easier the remaining companies will find it to dump their employees, because they’ll have less and less worry that you’ll find another job with in-house health insurance.

That wouldn’t necessarily be a negative thing; a lot of health experts think that dumping will ultimately be good, because it will force people to be more conscious consumers of health insurance. But good or bad, it’s probably a ways into the future.