May 1 2012

May Day for ObamaCare

Hadley Heath

Well, so much for “If you like your coverage, you can keep it!”

A new report from the House Ways and Means Committee should finally put to rest any mangy ideas that working Americans had about keeping their employer-sponsored health insurance.

First, a refresher on what ObamaCare says: Any employer of more than 50 workers must – as of 2014 – provide health insurance coverage for their workers that is consistent with the law’s “minimum essential coverage” requirements (determined by the Department of Health and Human Services).  Any employer in this category who fails to provide insurance to their workers will face a penalty of $2,000 per worker per year (or $3,000 in some cases, if there are workers who face “unaffordable” coverage options).

Listen, employers want to offer health insurance coverage.  It’s been a common practice in our country, and it is helpful to employers who want to attract and retain good employees.  Also, employers have an interest in keeping their workers healthy (so they will be able to perform their work).

But ObamaCare puts employers between a rock and a hard place.  The scenario would be different if health insurance premiums were expected to decrease.  But, given the facts that 1) they’ve only continued to increase since the passage of the Affordable Care Act and 2) these increases show no signs of slowing down because more and more benefits will be mandated into the “minimum essential coverage” requirements... this benefit is becoming more and more burdensome for employers to provide (and is eating up some potential wage growth for workers, too!)

So with prices for insurance going up, up, up, employers can now choose between continuing to offer very expensive benefits to their workers (again, probably in the place of raised wages), or paying the penalty – a measly $2,000 per worker – thus sending workers to the statewide, taxpayer-subsidized exchanges, and oh yeah, saving billions of dollars themselves.

That’s what today’s report details. 71 Fortune 100 companies were surveyed:

Individually, these employers could save, on average, $402.3 million ($4,821 per fulltime and part-time U.S. employee) – on an after tax basis – in 2014 alone by eliminating their health insurance coverage and instead paying the employer mandate’s $2,000 per full-time employee fine.  From 2014 through 2023, the average employer responding to the survey could save $5.9 billion if they dropped coverage in favor of paying the mandate penalty.

This isn’t surprising because this isn’t the first time we’ve heard employers saying they plan to drop coverage.  Consider the McKinsey and Co. employer survey from early 2011 that indicated that more than 30 percent of employers would definitely or probably drop health insurance benefits after 2014.

In our concern over today’s report and the prospect of these sweeping changes to our health care system, we shouldn’t lose sight of what’s truly good, bad, and ugly:

What’s good: Unlinking employment and health insurance could actually be a good thing.  There are a few arguments for removing the link between employment and health insurance.  To boil it down: 1) People shouldn’t have to make a collective decision about health insurance coverage, especially not with a group of people who share only one thing in common: their workplace.  More consumers making decisions for themselves would result in more robust competition.  2) People with employer-sponsored insurance can pay for their insurance with pre-tax dollars while people on the individual market cannot.  That’s unfair.  And 3), individuals wouldn’t have to worry about losing their insurance when changing jobs if the two weren’t linked.

So it is not the idea of unlinking employment and insurance that is at the root of the problem.  We could more easily allow the market to work by giving employer-sponsored and individual-market health insurance the same tax treatment.

What’s bad: The manner in which ObamaCare unlinks employment and health insurance is a bad thing.  The law does essentially everything through mandates.  Then, to back the mandates up, the law includes penalties that aren’t harsh enough to actually produce the desired behaviors.  First of all, mandates take away from our choices and raise prices.  Secondly, when many employers inevitably dump coverage, ObamaCare’s response for that is the statewide exchanges.  The statewide exchanges – if they can even get set up in time – will be expensive for taxpayers and will limit the health insurance marketplace in each state, reducing market competition through state-controlled entry into the health insurance market.

What’s ugly: It’s ugly that President Obama promised that, “If you like your health insurance, you can keep it."

Todays’ report points out that even the President admits his signature law breaks this promise:

“[Y]ou know, we said from the start that -- that it was going to be important for us to be consistent in saying to people if you can have your -- if you want to keep the health insurance you've got, you can keep it; that you're not going to have anybody getting in between you and your doctor in your decision making. And I think that some of the provisions that got snuck in might have violated that pledge.”

Some things just “got snuck in.”  Hmph.  How disappointing that the President signed the law anyway.

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