Will Obamacare decrease health benefits?

The Washington Post‘s Ezra Klein tries to assure businesses that Obamacare won’t be so bad.  But in doing so, he makes me wonder whether a program built largely around employer-provided health insurance might have the effect of eliminating many people’s employer-provided health insurance:

The health-care law’s treatment of larger employers is almost laughably complicated. If you’ve got fewer than 50 employees, nothing is asked of you, and if you’re willing to provide insurance for your employees, you get a giant tax credit, at least for awhile.

But if you’re a business with more than 50 full-time employees, matters become considerably more complex.

If you’ve got more than 50 full-time employees and you already offer them health insurance, you can stop reading now. You’re in the clear.

If you’ve got more than 50 full-time employees and you don’t offer them coverage and you don’t pay them enough to buy coverage on their own without using subsidies, then you have to pay $2,000 for each employee, except for your first 30 employees.

If you’ve got more than 50 full-time employees and you offer some of them coverage but others have to apply for federal subsidies and buy coverage themselves, then you pay the lesser of $3,000 for each employee receiving insurance subsidies or $2,000 for each full-time employee, once again excluding the first 30 employees.

Weird, right? But the complexities of this policy obscure a huge win for employers. In 1974, President Richard Nixon’s health-care plan proposed forcing employers to pay 75 percent of the cost of basic health insurance for their employees, though there would be some assistance for smaller businesses. In 1994, President Bill Clinton proposed forcing employers to pay 80 percent of the cost of basic heath insurance for their employees, though a somewhat confusing series of caps meant that smaller businesses would end up paying much less.

In other words, both Democratic and Republican presidents used to think the proper role for business in the American health-care system was to pay most of the cost of their employee’s health-care insurance.

Under the Affordable Care Act, the principle is different, and much less onerous: Employers don’t need to offer health care, and they don’t need to pay for most of the cost of their employee’s health care, but if their employees are taking advantage of public subsidies, then the employer should have to pay a penalty equal to about 1/8th the cost of the average employer-provided health-insurance plan.

via Cheer up, Papa John’s. Obamacare gave you a good deal..

So if a company has a choice between paying $16,000 (or more, or a large percentage of this amount) for an employee’s health insurance or paying a $2,000 fine, since de-stigmatized as a “tax,” won’t companies have an overwhelming economic incentive to drop health benefits altogether?  It would be far cheaper to pay the tax than to pay for health benefits.

Employees would then have to turn to the “insurance exchanges” to buy their own insurance, possibly with a government subsidy (shooting up the cost to taxpayers), though still with a large expenditure out of their own pockets.  Or they might just join the ranks of the uninsured, paying their own necessary fines or taxes.

Am I missing something, or might Obamacare have exactly the opposite effect that it intended?

 

About Gene Veith

Professor of Literature at Patrick Henry College, the Director of the Cranach Institute at Concordia Theological Seminary, a columnist for World Magazine and TableTalk, and the author of 18 books on different facets of Christianity & Culture.

  • Orianna Laun

    If what is already happening is any indication, healthcare will decrease benefits. My nephew had some coverage for the services he needed for his autism. The state took over, and now his services are greatly diminished. Employers are already talking of cutting workers’ hours to avoid paying, or finding the least-priced plan which is hardly any coverage at all.

  • Orianna Laun

    If what is already happening is any indication, healthcare will decrease benefits. My nephew had some coverage for the services he needed for his autism. The state took over, and now his services are greatly diminished. Employers are already talking of cutting workers’ hours to avoid paying, or finding the least-priced plan which is hardly any coverage at all.

  • MarkB

    Since Obama Care has perverse inverse incentives for companies to provide health insurance for their employees it will cause some companies to eliminate their current health coverage. This in turn will lead to outrage on the political left and will then result in changes to the law to either force companies to not eliminate or reduce their health care plans or to raise the fines/taxes on the companies.

  • MarkB

    Since Obama Care has perverse inverse incentives for companies to provide health insurance for their employees it will cause some companies to eliminate their current health coverage. This in turn will lead to outrage on the political left and will then result in changes to the law to either force companies to not eliminate or reduce their health care plans or to raise the fines/taxes on the companies.

  • Tom Hering

    Like, if Obamacare had never passed, most companies were going to maintain – never mind increase – the level of benefits they offered their employees? I distinctly remember the trend being otherwise, for decades, and regardless of who was in office.

  • Tom Hering

    Like, if Obamacare had never passed, most companies were going to maintain – never mind increase – the level of benefits they offered their employees? I distinctly remember the trend being otherwise, for decades, and regardless of who was in office.

  • http://theoldadam.com/ Steve Martin

    Choices will go down. Prices will go up. Taxes will go up and freedom will go down.

    The day will come when people are just given pain medication and will be told they cannot have whatever procedure that they need, because they are too old and there just aren’t the resources.

    The 1st stage thinkers, who are have the big hearts, never look at the outcomes.

  • http://theoldadam.com/ Steve Martin

    Choices will go down. Prices will go up. Taxes will go up and freedom will go down.

    The day will come when people are just given pain medication and will be told they cannot have whatever procedure that they need, because they are too old and there just aren’t the resources.

    The 1st stage thinkers, who are have the big hearts, never look at the outcomes.

  • Steve Billingsley

    No, Professor Veith

    You aren’t missing something. It is as bad as you portray.

    Tom @ 3
    You are correct inasmuch that the pre-Obamacare system was bad and getting worse. But that doesn’t imply that Obamacare actually solves anything. It only exacerbates some of the worst features of the current system. It is a giant subsidy to health insurance companies (at least the ones that play ball with the system). It increases demand by adding millions of people into the system and doesn’t increase supply one iota. In fact, it decreases supply by expanding the number of people on Medicaid rolls when many providers already don’t take Medicaid patients due to the low reimbursement rates. Increase demand, decrease supply = higher costs.

    The only possible silver lining to me is that as the law gets fully implemented the flaws will become more and more apparent and hopefully some of them can be corrected.

  • Steve Billingsley

    No, Professor Veith

    You aren’t missing something. It is as bad as you portray.

    Tom @ 3
    You are correct inasmuch that the pre-Obamacare system was bad and getting worse. But that doesn’t imply that Obamacare actually solves anything. It only exacerbates some of the worst features of the current system. It is a giant subsidy to health insurance companies (at least the ones that play ball with the system). It increases demand by adding millions of people into the system and doesn’t increase supply one iota. In fact, it decreases supply by expanding the number of people on Medicaid rolls when many providers already don’t take Medicaid patients due to the low reimbursement rates. Increase demand, decrease supply = higher costs.

    The only possible silver lining to me is that as the law gets fully implemented the flaws will become more and more apparent and hopefully some of them can be corrected.

  • MarkB

    Steve @ 5
    “The only possible silver lining to me is that as the law gets fully implemented the flaws will become more and more apparent and hopefully some of them can be corrected.”

    Laws will get passed, that is for sure, in an attempt to “fix” this mess. However, It will just get worse and worse since no one has taken into the equations the law of unintended consequences.

  • MarkB

    Steve @ 5
    “The only possible silver lining to me is that as the law gets fully implemented the flaws will become more and more apparent and hopefully some of them can be corrected.”

    Laws will get passed, that is for sure, in an attempt to “fix” this mess. However, It will just get worse and worse since no one has taken into the equations the law of unintended consequences.

  • http://www.biblegateway.com/versions/Contemporary-English-Version-CEV-Bible/ sg

    Do you think we will see a lot of stories in the media about people who are denied/not offered treatments because of the provisions of the health care law?

  • http://www.biblegateway.com/versions/Contemporary-English-Version-CEV-Bible/ sg

    Do you think we will see a lot of stories in the media about people who are denied/not offered treatments because of the provisions of the health care law?

  • http://facebook.com/mesamike Mike Westfall

    [Tinfoil hat = on]

    It’s all part of The Plan.

    Those who crafted Obamacare intended this, so that the ignorant masses would get outraged at Big Evil Corporations over the loss of health care coverage, and thus DEMAND that the entire industry be taken over by Uncle Sugar Daddy and provided for “free.”

    [tinfoil hat = off]
    Keep Calm and Carry On.

  • http://facebook.com/mesamike Mike Westfall

    [Tinfoil hat = on]

    It’s all part of The Plan.

    Those who crafted Obamacare intended this, so that the ignorant masses would get outraged at Big Evil Corporations over the loss of health care coverage, and thus DEMAND that the entire industry be taken over by Uncle Sugar Daddy and provided for “free.”

    [tinfoil hat = off]
    Keep Calm and Carry On.

  • http://www.bikebubba.blogspot.com bike bubba

    “Like, if Obamacare had never passed, most companies were going to maintain – never mind increase – the level of benefits they offered their employees? I distinctly remember the trend being otherwise, for decades, and regardless of who was in office.”

    Tom, the trick here is that the Health Insurance Deform Act provides perverse incentives to accelerate this. For example, a number of restaurant chains are reducing staff to < 30 hours per week to avoid the mandate already. So not only do workers not get benefits, they don't get the hours, either.

    Or, put in economic terms, the HIDA adds a marginal disincentive, one that Democrats blithely ignored.

  • http://www.bikebubba.blogspot.com bike bubba

    “Like, if Obamacare had never passed, most companies were going to maintain – never mind increase – the level of benefits they offered their employees? I distinctly remember the trend being otherwise, for decades, and regardless of who was in office.”

    Tom, the trick here is that the Health Insurance Deform Act provides perverse incentives to accelerate this. For example, a number of restaurant chains are reducing staff to < 30 hours per week to avoid the mandate already. So not only do workers not get benefits, they don't get the hours, either.

    Or, put in economic terms, the HIDA adds a marginal disincentive, one that Democrats blithely ignored.

  • Chris

    @Mike – that’s not tinfoil hat stuff at all. The final objective for this administration is a single payer system ala the UK’s NHS. Obamacare is merely a stepping stone.

  • Chris

    @Mike – that’s not tinfoil hat stuff at all. The final objective for this administration is a single payer system ala the UK’s NHS. Obamacare is merely a stepping stone.

  • SAL

    The proposal (it’s hard to label it a law when it’s so vague) was projected to leave 30 million uninsured.

    The CBO originally estimated that ~4 million people would pay the healthcare tax in 2016. Now they estimate ~6 million people will pay that tax in 2016. The healthcare tax is estimated to mainly effect the lower/middle classes (~80%)

    That 6 million is certain to rise as more small businesses opt out of insurance and more healthy individuals utilize the pre-existing conditions exemption to not buy insurance until they need it.

    I wonder if the real intent behind the law was to raise taxes on the lower classes and small businesses without openly admitting to it.

    It’s hard to believe an intelligent person would actually expect such a defective utopian scheme to work.

  • SAL

    The proposal (it’s hard to label it a law when it’s so vague) was projected to leave 30 million uninsured.

    The CBO originally estimated that ~4 million people would pay the healthcare tax in 2016. Now they estimate ~6 million people will pay that tax in 2016. The healthcare tax is estimated to mainly effect the lower/middle classes (~80%)

    That 6 million is certain to rise as more small businesses opt out of insurance and more healthy individuals utilize the pre-existing conditions exemption to not buy insurance until they need it.

    I wonder if the real intent behind the law was to raise taxes on the lower classes and small businesses without openly admitting to it.

    It’s hard to believe an intelligent person would actually expect such a defective utopian scheme to work.

  • http://www.redeemedrambling.blogspot.com John

    The ACA proposal is so complex we can reasonably expect quite a lot of unintended consequences. One that we are already seeing is an increase in part time jobs (<30 hrs week), and a decrease in full time employment. Why? So that employers don't have to pay for health care. Unfortunately, I think this will spark a legislative backlash which will have its own set of unintended consequences.

  • http://www.redeemedrambling.blogspot.com John

    The ACA proposal is so complex we can reasonably expect quite a lot of unintended consequences. One that we are already seeing is an increase in part time jobs (<30 hrs week), and a decrease in full time employment. Why? So that employers don't have to pay for health care. Unfortunately, I think this will spark a legislative backlash which will have its own set of unintended consequences.

  • Random Lutheran

    Never listen to what someone claims their intentions to be; rather, look at what they say they will do, and suss out what the likely outcome will be. It is in that likely outcome that the intentions, no matter what has been said about them, are made clear.

  • Random Lutheran

    Never listen to what someone claims their intentions to be; rather, look at what they say they will do, and suss out what the likely outcome will be. It is in that likely outcome that the intentions, no matter what has been said about them, are made clear.

  • SKPeterson

    The problem is not in the dropping of healthcare coverage, or asking people to pick up the tab for their own insurance. That would actually be a free-market solution. The problem lies in the imposition of fines, the requirements placed on individuals (the mandate) and on firms. What is being created is a semi-socialized system of healthcare payments with a market veneer (the exchanges). All that has been accomplished is that we have taken an expensive, mostly broken government controlled healthcare delivery and compensation system and replaced it with a different expensive, soon-to-be-broken government controlled healthcare delivery and compensation system. Winners? Healthcare and health insurance companies, government bureaucrats. Losers? Everyone else.

  • SKPeterson

    The problem is not in the dropping of healthcare coverage, or asking people to pick up the tab for their own insurance. That would actually be a free-market solution. The problem lies in the imposition of fines, the requirements placed on individuals (the mandate) and on firms. What is being created is a semi-socialized system of healthcare payments with a market veneer (the exchanges). All that has been accomplished is that we have taken an expensive, mostly broken government controlled healthcare delivery and compensation system and replaced it with a different expensive, soon-to-be-broken government controlled healthcare delivery and compensation system. Winners? Healthcare and health insurance companies, government bureaucrats. Losers? Everyone else.

  • Cincinnatus

    Tom, don’t be dense. At least in the previous–very flawed–system, employers weren’t planning to dump their employees en masse out of health coverage as a direct result of government policy.

    You don’t have to be a conservative shill to recognize the basic–and intensely problematic–economic incentives at work here.

  • Cincinnatus

    Tom, don’t be dense. At least in the previous–very flawed–system, employers weren’t planning to dump their employees en masse out of health coverage as a direct result of government policy.

    You don’t have to be a conservative shill to recognize the basic–and intensely problematic–economic incentives at work here.

  • Tom Hering

    Cincinnatus, do you think you’ll ever be able to disagree with someone without also insulting them? I await the day.

  • Tom Hering

    Cincinnatus, do you think you’ll ever be able to disagree with someone without also insulting them? I await the day.

  • Cincinnatus

    Oh, Tom. You know me better than that, and I know you better than that. Why, in political discussion, must you pretend to such cranial density? Why must thou deliberately obfuscate the point?

  • Cincinnatus

    Oh, Tom. You know me better than that, and I know you better than that. Why, in political discussion, must you pretend to such cranial density? Why must thou deliberately obfuscate the point?

  • Marian

    Back before the bill was passed, both of these effects (increase in part-time vs. full-time jobs, employers dropping coverage becase the fine is so much less than the cost) were predicted by conservatives. It is designed as a first step to a single-payer system.

  • Marian

    Back before the bill was passed, both of these effects (increase in part-time vs. full-time jobs, employers dropping coverage becase the fine is so much less than the cost) were predicted by conservatives. It is designed as a first step to a single-payer system.