Study: Costs will rise on mid-size firms from new healthcare law

President Obama's healthcare law won't erode employer-based health insurance — but it will raise some companies' costs by nearly 10 percent, according to a new analysis from the Urban Institute.

Although the law's critics usually focus on small businesses, the new paper says medium-sized firms will see the biggest cost increase.

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Mid-sized businesses — firms that have between 101 and 1,000 employees — would have seen a 9.5 percent jump in their total healthcare costs if the Affordable Care Act had been fully in place this year, the paper says. (Many of the law's key provisions don't take effect until 2014.)

Small businesses would have seen their costs fall by 1.4 percent. Firms with more than 1,000 workers would have seen a 4.3 percent increase.

The report confirms one central criticism of the healthcare law — that it will increase employers' costs — while also undercutting charges that the law will lead employers to quit offering healthcare coverage. Overall, about 4 million more employees would have had healthcare coverage if the ACA had been in place this year, the Urban Institute found.

Higher costs stem largely from expanded coverage, the report says.

"Overall, the evidence simply does not support critics’ arguments that the ACA will burden employers and undermine employer-sponsored health insurance," the paper says. "On the contrary, except for a cost increase to mid-size employers due largely to enrollment increases, the ACA benefits rather than burdens small employers who want to provide health insurance."

Small businesses are central to many criticisms of the new law. The National Federation of Independent Business was part of the lawsuit decided by the Supreme Court this summer, and Republican lawmakers argue that the law's new mandates will crush small employers.

But according to the Urban Institute analysis, tax credits and purchasing efficiencies will help small businesses. New mandates, though, will make coverage more expensive for mid-size and large employers.


Medium-sized companies are less likely to offer health benefits than their larger counterparts, the paper says, and would therefore have to pay more in penalties. The healthcare law charges employers a fine for each worker who receives a government subsidy to buy insurance on his or her own.