Employees prefer pre-ACA insurance plans over later offerings, economists find

Last modified January 8, 2021. Published January 8, 2021.
Availability of options is important to employees when it comes to insurance. (AP Photo/U.S. Centers for Medicaid & Medicare)

Availability of options is important to employees when it comes to insurance. (AP Photo/U.S. Centers for Medicaid & Medicare)

Employees are more likely to select an employer-sponsored health insurance plan that was “grandfathered” into compliance with the Affordable Care Act than a plan created after the law passed in 2010, according to recent research, suggesting that flexible options are crucial as U.S. lawmakers consider further health care reform.

Using data from the Kaiser Family Foundation and the Health Research and Educational Trust, researchers found in a study published in October in the Journal of Economics and Finance that employees favored pre-ACA grandfathered plans by as much as 8.2 percentage points, depending on the plan type and a company’s size and location. 

While other research has examined the ACA’s impact on health outcomes and insurance premiums, this study is among the first analyses to compare take-up rates for grandfathered and non-grandfathered insurance plans.

The ACA, while guaranteeing free preventative care, coverage of pre-existing conditions and other benefits, did not offer as many choices of insurance plans to employers and individuals as plans that had been established prior to the passage of the law. When advocating for the passage of the act in 2009, former President Barack Obama promised people that they would be able to keep their health care plan, but between 1.8 million and 4.7 million health insurance plans were replaced after the law was passed.

“A lot of employers hated the ACA plans because they’re boxed … they’re pre-made,” said Nour Kattih, lecturer at Middle Tennessee State University and co-author of the research. But, “They’re supposed to be pre-made into a superior quality” that removes lifetime maximums and allows dependents under age 26 to remain on their parents’ health care plan, among other “really good things.”

Despite the apparent benefits of the new insurance plans under the ACA, however, Kattih and her colleagues found that employees in a variety of different circumstances — those working at small firms, at large firms and in different parts of the country — generally preferred the grandfathered plans.

It’s unclear exactly why, Kattih said. “Maybe because people really love the freedom, maybe employers were encouraging their employees to enroll. … It seems like a lot of people like to keep what they had. It feels secure.” 

In the study, the researchers compared 1,852 grandfathered insurance plans and 1,183 non-grandfathered plans, noting that the average take-up rates are similar, around 81%, for both types of plans.  

For companies that offer either type of insurance plan, though, take-up rates were higher for grandfathered insurance plans, by 2.5 to 3.4 percentage points, no matter the size of the company. For small companies, the difference in take-up rates was about 8.2 percentage points, and for large companies, it was about 2.9 percentage points.

Employees in the Midwest U.S. reacted to a particularly strong degree, Kattih and her colleagues wrote, with take-up rates for grandfathered plans at Midwestern companies 6.7 percentage points higher than for non-grandfathered plans. At small companies in the Midwest, the difference was a noteworthy 20.8 percentage points; for large companies, it was 4.5 percentage points.

“If our goal is to expand access to care — and whether this is logical or not — people are happy with what they have,” Kattih said, and it’s important to keep that in mind as U.S. politicians debate further health care reform and consider single-payer health care options such as Medicare for All.

“If Medicare for All is going to be a real solution, like a solution that will be implemented for real, then we have to think about allowing people the flexibility of designing their plans, whether it’s good for them or not,” she said. “But at least they would accept it more.”

A potential solution, Kattih said, is to create a health insurance “box” with certain required parameters that also allows individuals a certain amount of choice. Even if that means people take on more risk, “They’ll accept that coverage just because they chose it.”

“People like flexibility,” Kattih said. “People hate when you put boxes around them."

The study “Keeping what you like: grandfathering and health insurance coverage take-up rates under the ACA,” published Oct. 4, 2020, in the Journal of Economics and Finance, was authored by Nour Kattih, Middle Tennessee State University; Fady Mansour, Columbus State University; and Franklin G. Mixon Jr., Columbus State University.

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