How ObamaCare will kill job-based plans
Monday, August 11, 2014 5:00 PM
Americans aren't all that optimistic about ObamaCare, according to a recent Kaiser Family Foundation poll: Fifty-seven percent say the law isn't working as planned.
That number will shoot even higher if employer health insurance vanishes, as an S&P Capital IQ report predicts. The financial-research firm forecasts that 90 percent of Americans who now have employer-sponsored coverage will lose it by 2020 -- and have to turn to government exchanges for policies.
The Obama administration has long denied that its health-reform law would cause companies to stop providing insurance. But thanks to an ObamaCare-fueled increase in health costs, employer-sponsored coverage may soon become a thing of the past.
The S&P report comes three years after the consulting firm McKinsey & Co. suggested that 30 percent of employers would dump workers into exchanges to save money.
Democrats weren't convinced. The White House attacked the McKinsey report as "flawed"; Senate Finance Committee then-Chairman Max Baucus blasted its "faulty analysis and misguided conclusions."
ObamaCare's defenders even argued that more employers would provide health insurance once the law went into full effect. Recent history hasn't borne them out.
Health-benefits consultants around the country report that businesses are considering dumping their least-healthy employees onto the exchanges. By doing so, they can lower their own premiums -- and stick taxpayers with the tab for covering their most costly workers.
North Carolina benefits consultant Todd Yates recently told Kaiser Health News about this trend, saying that "employers are inquiring about it and brokers and consultants are advocating for it."
Offloading workers onto the exchanges could pay huge dividends. According to the S&P Capital IQ report, if all employers with more than 50 workers adopted this strategy, they'd collectively save $3.25 trillion. Among 500 of the country's biggest companies, the total savings could amount to $700 billion over 10 years.
Firms will be hard pressed to leave these savings on the table -- especially as their costs shoot up.
According to a recent study from the American Health Policy Institute, ObamaCare will saddle large firms -- those with more than 10,000 employees -- with an added $163 million to $200 million apiece in new costs over 10 years. That's equivalent to $4,800 to $5,900 per worker.
Brokers in Nevada are already reporting premium spikes of 35 to 120 percent for businesses in the state renewing their policies this year.
Rate hikes of this magnitude could put 90,000 employer policies in the state at risk of cancellation, according to William Wright, head of Las Vegas-based Chamber Insurance and Benefits.
The IRS is trying to stop employers from dumping their workers in the exchanges by threatening fines of up to $36,500 per worker. But that fine only applies if an employer tries to subsidize his worker's exchange coverage with untaxed income.
So firms can still offload their employees onto the exchanges -- and even cover a portion of their premiums, as long as they do so with income that's taxed like regular wages.
The IRS may not want employers to dump their workers into the exchanges. But the law's architects seem to want them to.
Former Obama health adviser Ezekiel Emanuel predicts that within the next three years, "a few big, blue-chip companies will announce their intention to stop providing health insurance. . . Then the floodgates will open."
By 2025, he estimates, fewer than one in five Americans will get insurance through work.
Another Obama ally, MIT economist Jonathan Gruber, recently admitted that employer-sponsored insurance isn't long for this world, calling it "a crumbling building."
As the employer insurance marketplace starts to crumble, President Obama continues to say of ObamaCare, "this thing is working."
Tens of millions of employees will soon find out what "working" really means when they are kicked off the health plans they were promised they could keep.
Sally C. Pipes is president, CEO, and Taube Fellow in Health Care Studies at the Pacific Research Institute. Her latest book is The Cure for Obamacare (Encounter 2013).