Free Markets, Free People
This, of course, is “unexpected” (and not believed) by some. In fact, the White House has pushed back saying the findings of the survey of 1,300 employers is at odds with findings from the CBO, Urban Institute and Rand Corporation studies.
In an email response, the official wrote that when Massachusetts initiated its own reform, the number of individuals with employer-sponsored insurance increased.
Indeed, the Rand study released in April noted: “The percentage of employees offered insurance will not change substantially, but a small number of employees in small firms (defined as those with under 100 employees in 2016) will obtain employer-sponsored insurance through the state insurance exchanges.”
In a Jan. 25 study, the Urban Institute said that reports of the demise of employer-sponsored insurance were “premature” and that few would stop offering.
“Our results show the opposite — the [Affordable Care Act] has little effect on overall [employer-sponsored] coverage, and overall employer spending on health care would be slightly lower under the ACA,” according to its own study.
However, one can speculate that as the law becomes better known, employers are having second thoughts about trying to cope with something most of them would just as soon lay off elsewhere. The cost and hassle just aren’t worth it and now that there are alternatives, a good percentage of them are actually interested in pursuing them:
The survey of 1,300 employers says those who are keenly aware of the health-reform measure probably are more likely to consider an alternative to employer-sponsored plans, with 50% to 60% in this group expected to make a change. It also found that for some, it makes more sense to switch.
“At least 30% of employers would gain economically from dropping coverage, even if they completely compensated employees for the change through other benefit offerings or higher salaries,” the study says.
It goes on to add: “Contrary to what employers assume, more than 85% of employees would remain at their jobs even if their employers stopped offering [employer-sponsored insurance], although about 60% would expect increased compensation.
Health care benefits are a net loser for any company. Cost added to the requirement for staff, contracts, problems, etc. makes it a program many employers would love to ditch. But such benefits have become a part of any competitive package through the years – the better the benefits, the more attractive the offer. Now, under ObamaCare, those “Cadillac” plan are going to be taxed (well, unless you have an exemption like most unions). So there’s little incentive to continue with them. Consequently, despite promises to the contrary, employers aren’t going to pay for something that is going to be taxed at a higher rate. So you won’t get to keep your plan.
Employers, in the meantime, are looking for cost savings alternatives and dumping health care cost and the associated hassles has to be very attractive to them. So it comes as no surprise, at least to me, that 30% of those surveyed are considering exactly that. A huge “told you so” that critics pointed to prior to ObamaCare passage that was largely waived away by supporters.
So who you going believe – CBO, Urban Institute and Rand, or human nature?
Yup – me too.
John Cassidy, writing in one of the blogs at that hotbed of reactionary conservatism, the New Yorker, notes the following about the BFD. First, he writes that the individual mandate is likely to prompt rather different behavior than the law assumes:
Consider the so-called “individual mandate.” As a strict matter of law, all non-elderly Americans who earn more than the poverty line will be obliged to obtain some form of health coverage. If they don’t, in 2016 and beyond, they could face a fine of about $700 or 2.5 per cent of their income—whichever is the most. Two issues immediately arise.
Even if the fines are vigorously enforced, many people may choose to pay them and stay uninsured. Consider a healthy single man of thirty-five who earns $35,000 a year. Under the new system, he would have a choice of enrolling in a subsidized plan at an annual cost of $2,700 or paying a fine of $875. It may well make sense for him to pay the fine, take his chances, and report to the local emergency room if he gets really sick. (E.R.s will still be legally obliged to treat all comers.) If this sort of thing happens often, as well it could, the new insurance exchanges will be deprived of exactly the sort of healthy young people they need in order to bring down prices. (Healthy people improve the risk pool.)
He then moves on to note that employers may respond in a rather unexpected fashion as well:
Take a medium-sized firm that employs a hundred people earning $40,000 each—a private security firm based in Atlanta, say—and currently offers them health-care insurance worth $10,000 a year, of which the employees pay $2,500. This employer’s annual health-care costs are $750,000 (a hundred times $7,500). In the reformed system, the firm’s workers, if they didn’t have insurance, would be eligible for generous subsidies to buy private insurance. For example, a married forty-year-old security guard whose wife stayed home to raise two kids could enroll in a non-group plan for less than $1,400 a year, according to the Kaiser Health Reform Subsidy Calculator. (The subsidy from the government would be $8,058.)
In a situation like this, the firm has a strong financial incentive to junk its group coverage and dump its workers onto the taxpayer-subsidized plan. Under the new law, firms with more than fifty workers that don’t offer coverage would have to pay an annual fine of $2,000 for every worker they employ, excepting the first thirty. In this case, the security firm would incur a fine of $140,000 (seventy times two), but it would save $610,000 a year on health-care costs. If you owned this firm, what would you do?
I assume that final question is rhetorical.
Too bad no one could explain this prior to the bill’s passage.
If only there was some intellectual discipline that tried to predict how people respond to incentives in a world of scarce resources!