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Even With Penalties, Many May Still Forgo Insurance (Washn)

Washington — Millions of lower-income workers who gain access to employer-sponsored health insurance under the Affordable Care Act may still choose not to purchase coverage, according to a new study.

Most of the lowest-income workers currently offered health benefits elect not to enroll, according to a study from the ADP Research Institute released yesterday. While the Affordable Care Act requires large employers to offer coverage, this study raises the possibility that many Americans may still decide to forgo the option.

“In 2014, there are going to be a number of people who are eligible for benefits for the first time,” said Christopher Ryan, vice president of ADP Strategic Advisory Services. “These additional people are primarily lower-income, and the critical question is: To what extent, if they have the opportunity to purchase benefits, will they participate?”

ADP, a payroll services company, studied the enrollment rate for health benefits offered at 300 companies with more than 1,000 employees. The majority of workers, 81 percent, who earned more than $50,000 elected to buy into health insurance benefits, according to the survey.

Lower-income Americans, by contrast, were less likely to purchase health benefits. Among full-time employees earning $15,000 to $20,000, 37 percent elected to purchase health benefits when they was made available. Among those earning $20,000 to $25,000, participation increased to 58 percent.

“For them, it’s an affordability issue,” Ryan said, noting that lower-income employees generally have to dedicate a larger share of their salary to purchasing health benefits than high-income earners do.

The health-care overhaul attempts to address the question of affordability. It requires employers with 50 or more employees to offer their workers a benefit plan that costs less than 9.5 percent of their income. If they do not, the companies will face thousands of dollars in federal penalties.

There are also penalties for workers who do not purchase coverage. Next year, workers who decline their employer-sponsored health insurance will face a $95 tax penalty, which will rise to $695 by 2016.

Still, its unclear whether those penalties will be enough to encourage lower-income workers to purchase insurance coverage.

Most workers with health benefits already spend less than the Obama administration’s affordability threshold on their plan. The ADP study found that only 8.6 percent of employees spent more than 9.5 percent of their income on health benefits.

Also, the $95 financial penalty for not purchasing coverage is probably cheaper than purchasing employer-sponsored health insurance.

If these low-income workers do not sign up, the Obama administration’s attempts to significantly expand health coverage could fall short of levels hoped. A White House official did not return a call for comment on the report.

That could also result in higher premiums for workers that do sign up. Low-income workers tend to be younger and, if they sign up, could lower the overall risk makeup of their employer’s health insurance pool and bring down costs.

“One of the key issues is how do we engage that population, get them to enroll in health care,” Ryan said. “I think its going to be a significant challenge.”