Employer-Sponsored Insurance Rose in Massachusetts

The share of workers opting to take company medical coverage rather than more take-home pay rose in Massachusetts after the state overhauled its health system in 2006, a result the U.S. Affordable Care Act may replicate, a report suggests.

The percentage of employees with insurance from their jobs rose to 72.1 in 2011 from 70.8 in 2006, according to a PricewaterhouseCoopers LLP analysis today. In the same period, the U.S. number dropped to 58.3 percent from 68.2 percent.

The conflicting numbers between Massachusetts and the rest of the nation may act as a guidepost for the 2010 federal Affordable Care Act, which requires most Americans to carry insurance beginning next year. The Massachusetts law was used by the Obama administration as a model for crafting the ACA.

“The mere existence of the requirement to have insurance may have influenced individuals as much, if not more than, the financial consequences for not doing so,” the researchers said.

Trade groups including the U.S. Chamber of Commerce in Washington have said businesses may drop employee coverage after weighing the benefits against the costs. The Congressional Budget Office said this year that about 27 million people are expected to gain coverage through the Affordable Care Act by 2017, though as many as 8 million people will lose health plans now offered through their employers.

Taxable Income

U.S. penalties for not carrying insurance and the tax advantages for both employers who provide it and workers who receive coverage may discourage businesses from dropping their plans, at least in the first few years of the national health law, said Ceci Connolly, the managing director of PricewaterhouseCooper’s Health Research Institute in Washington.

Employer-sponsored health insurance isn’t treated as taxable income under U.S. law, a benefit projected to cost the government $1 trillion in forgone taxes over the next five years.

“The message from Massachusetts is, employers and individual workers have a number of considerations to make when it comes to health insurance, and they should not quickly discount either the mandates or the value of the tax exclusion,” Connolly said in a telephone interview.

The Massachusetts and federal laws each require individuals to carry insurance and businesses to offer coverage of some type. Both laws provide exemptions for people too poor to afford coverage and for small businesses. Penalties differ.

Federal Fines

The individual penalty for not carrying insurance under the federal law will be $95 next year or 1 percent of income, whichever is more. In Massachusetts, people have to pay 50 percent of the lowest premium available for each month they don’t carry insurance, a fine that was as much as $1,260 last year, according to PricewaterhouseCoopers.

U.S. health insurers have said the individual penalty under the federal law may not be high enough to compel people to carry insurance.

Massachusetts also requires all businesses with 11 or more employees to help pay for their health insurance or face a fine of as much as $295 per worker. The threshold under the U.S. law is 50 workers or more, and the penalty is $2,000 to $3,000 per employee.

The National Federation of Independent Business, a Nashville, Tennessee-based trade group that represents small businesses, sued to overturn the ACA in a case that went to the Supreme Court. The court ruled in June that the law’s mandate to carry insurance is constitutional.