Last week, James Capretta, one of my Economics 21 colleagues, hosted an ObamaCareWatch conference that featured the work of Richard Burkhauser, Kosali Simon, and Sean Lyons, who recently released a report on the coverage effects of PPACA. Their findings on the potential for the crowding out of employer-sponsored insurance (or ESI) are surprising and extremely worrisome:

We have shown that the amount of ESI crowd out that is possible is much larger than previous estimations have modeled. This is the case because they have not explicitly modeled the ability of employers and employees to renegotiate their compensation agreements to maximize the number of ESI covered workers who could be eligible for exchange premium subsidies. We find a very large percentage of these family income eligible ESI covered workers would prefer to take these subsidies with their employers’ approval. This would happen even though firms will be fined $3,000 for each worker whose ESI is judged unaffordable and who obtains subsidized coverage. This is despite the fact that such workers will have to pay their share of the exchange premium with post-tax dollars. The second is the unsettled question of how the affordable coverage rule will be codified in the final ACA regulations. The language in doubt is whether the affordable coverage rule applies to single coverage or family coverage for workers with families. We show that this as yet uncodified interpretation of the language of the ACA will dramatically affect the degree that the ACA crowds out ESI.
Our intention here is not to take a stance on what should happen with respect to codifying affordable coverage language in the ACA or on how employers and employees will change their compensation agreements to take advantage of the incentives in the ACA. Rather, it is to point out the potential importance of these ACA issues on coverage patterns and gross exchange subsidy costs—potential implications that have received little attention thus far. We have primarily focused on the employment effects of the ACA which are likely to be small and on ESI crowd-out effects that have the potential to be much more important. The total cost of exchange subsidies to tax payers is $66 billion in our most dynamic case relative to $19 billion in our least dynamic case. Our findings here echo those first suggested in Holtz-Eakin and Smith (2010) that if employees are fully able to sort across large firms based on the demand for health insurance, exchange subsidies could be about three times as large as estimated by the CBO. But our analysis using data from the CPS more clearly shows the distributional consequences of these unintended effects across income, wage, and firm size. In fact, when we replicate the Holtz-Eakin scenario with our method in Appendix Table 2, we find that full sorting across large firms would lead to coverage rages around 62 percent. The corresponding subsidy costs (not shown in a table) to the government come to about $75 billion.
In our models we show that even without costly sorting of workers into firms along health insurance lines, we could have behavioral changes that lead to almost as large a loss in ESI as if workers were able to sort. Doing so, we show that not accounting for these dynamic behaviors and depending on static models that ignore such behavior could lead to a substantial underestimation of the number of workers who will move out of ESI plans and into the subsidized exchanges. This will lead to much higher costs for taxpayers from these subsidies. [Emphasis added]

Moreover, the initial CBO projections assumed that employment levels would have increased considerably by now.