PPACA and existing employer coverage

Wall Street Journal has an op-ed by Gov. Bredesen of Tennessee (D-TN) saying PPACA (who knew the WSJ could actually allow the name of the law to be written on its editorial page!) will incentivize businesses to drop insurance coverage. There of course will be some of this effect, which is essentially crowd out of now provided employer based insurance to exchange based insurance, but CBO has said it will be small. More importantly, it hasn't happened in Massachusetts, which has of course implemented a plan on which PPACA is largely based.

As I glanced at the Governor's piece this morning I was thinking that the he didn't have his math/magnitude of effect straight, and that he was wildly over-stating his case. So, I was going to try and do a 'back of the envelope calculation' to convince myself that the Governor was wrong and write a blog post about it.....but I cannot do better than this from Jon Gruber.

In many ways the largest fallacy of the Governor's argument, and most of those against PPACA is that it doesn't mention/remember that the baseline status quo of the health system is a train wreck. The employer-based private insurance system is unwinding; in 2009 the absolute number of persons with employer based cover dropped. Finally, PPACA is based on the Massachusetts plan that has been implemented. It hasn't been perfect, and shows that more needs to be done to address costs, but it hasn't lead to a meltdown of employer based insurance due to employers dropping coverage there. Massachusetts is an even higher cost state than Tennessee, so the incentive should have been even stronger there for employers to drop coverage.....but it didn't happen.

The Governor has a new book on health reform that I haven't read, but I will take a look....

update: Austin Frakt's take.

Another update 10/22: RAND corporation micro-simulation of PPACA actuallys shows a large increase in uptake of employer-based coverage. They note the effect of individual mandate penalties as increasing propensity of some who now decline offers of employer-based insurance to take them up in the future. The RAND corporation's analysis is rosier than is CBOs....and both of them and actual experience in Massachusetts are roughly the opposite of the effect the Governor says he expects.