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McKinsey Quarterly: How U.S. Health Care Reform Will Affect Employee Benefits

Authors: Shubham Singal, Jeris Stueland, and Drew Ungerman
June 2011

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In a break from the politics of health care reform, McKinsey Quarterly predicts that recent legislation will lead to a significant shift away from employer-provided health insurance among lower-income workers.

US health care reform sets in motion the largest change in employer-provided health benefits in the post–World War II era. While the pace and timing are difficult to predict, McKinsey research points to a radical restructuring of employer-sponsored health benefits following the 2010 passage of the Affordable Care Act.

Many of the law's relevant provisions take effect in 2014. Our research suggests that when employers become more aware of the new economic and social incentives embedded in the law and of the option to restructure benefits beyond dropping or keeping them, many will make dramatic changes. The Congressional Budget Office has estimated that only about 7 percent of employees currently covered by employer-sponsored insurance (ESI) will have to switch to subsidized-exchange policies in 2014. However, our early-2011 survey of more than 1,300 employers across industries, geographies, and employer sizes, as well as other proprietary research, found that reform will provoke a much greater response.

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