How Large Employers Plan to Respond to ObamaCare
This is a Chris Jacobs report on a new Towers Watson study:
- “The overwhelming majority (90%) of employers believe health care reform will increase their organization’s health care benefit costs;”
- Nearly nine in ten firms (88%) plan to pass increased costs from the law on to their employees through higher premiums;
- Nearly three in four firms (74%) plan to pass the law’s higher costs on to their employees by changing plan options, restricting eligibility, or increasing deductibles or co-pays;
- More than one in ten firms plan to pass on the law’s higher costs by reducing employment (12%) or reducing employer contributions to retirement plans like 401(k)s (11%);
- Of those firms offering coverage, 43% are “likely to eliminate or reduce retiree medical programs” as a result of the law’s enactment.
Health advocates and left-of-center health policy wonks like the way employer plans create arbitrary risk pools. However, advocates and wonks often fail to appreciate that employee health benefits are not free perks that employers merely consider the cost of doing business. Rather, health benefits are a portion of a worker’s total compensation. If the cost of benefits rises, take-home pay will fall to compensate. To the extent employers are required to provide benefits that workers are not willing trade take-home cash wages for, the benefits become a tax on labor that will inhibit job creation.
Employer mandates are not unlike a VAT tax from the standpoint the people who ultimately bear the cost of an employer health coverage do not realize they are paying it.
What’s most amazing is that Congress did this right in the middle of one of the deepest recessions in our history.
Bret, these people are hell bent on making it as expensive and undesirable as possible for employers to hire workers. They could care less that we are in a recession.
According to John Goodman’s editorial in the Wall Street Journal last Friday, large employers are giving serious thought to dropping their coverage altogether.
Larry sez: “large employers are giving serious thought”
According to the survey, 3% of the employers thought they would pay the fine rather then provide coverage. That’s not very serious thought to me.
If the employers decide to drop group insurance, this will make the exchanges more attractive.
People will then have individual polices they can continue until Medicare.
What are the drawbacks?
Don Levit
Don sez: “What are the drawbacks?”
One drawback is that when you have a large number of middle class voters in the exchange there will be pressure to make the exchanges provide a high level of benefits. We’ve seen this before, the political pressure of seniors has insured that Medicare provides great benefits.
Another drawback is that many people find they are no longer tied to their employer because of health care. The current situation isn’t indentured servitude, but it’s close to that. Now, it will be easy to switch jobs or resign to start a business.
Third drawback, it’s likely that, once again, because of political influence, the quality of the benefits in the exchange will make it as popular as Medicare.
A fourth drawback is that if you should lose your job, your health care won’t suddenly become a tremendous financial burden before it finally disappears when your COBRA runs out.
As we have show in other publications at this site (time does not permit my finding the link) personal and portable insurance is possible and workable without health insurance exchanges.
If Massachusetts is the guide, subsidized insurance in the exchanges will pay Medicaid rates plus 10%. That means these folks will be pushed to the back of the waiting lines as 32 million newly insured people try to double their consumption of health care — with no new doctors or nurses or other paramedical personnel.
And if you are within 133% of poverty (about $30,000 for a family) you are not allowed to go into the exchange. You have to go directly to Medicaid (and don’t pass GO).
So there may be some very significant drawbacks from losing you employer plan.
What we recommend by the way, is ending the prohibition on employers’ buying individually owned insurance. So you could have something similar to what you now get from your employer but you could take it with you to the next job.
Employers being able to buy individuially owned insurance would be a step forward.
However, this individual insurance would need to be funded differently than group plans.
Group insurance, as well as individual insurance,is funded on a pay-as-you-go basis.
Health insurance,whether provided privately or through government, is not sustainable on a pay-as-you-go basis.
HSAs are a step in the right direction, for at least a fund is available to help reduce the ever increasing premiums.
And, this fund is real money available today and in the future, as opposed to the Social secirity and Medicare trust funds, which are IOUs whose payback is deferred until the funds run out (the numbers go to zero).
Don Levit
I, for one, think that increasing costs for employers might be a gift in disguise. We’ll be taking control out of the hands of our employers and putting it back into the hands of consumers. It will remove a lot of the inefficiency in the current market.