Tag: employee health benefits

WSJ: ObamaCare Could Reduce Employee Health Benefits

ObamaCare supporters promised the law’s employer mandate would require employers to provide workers with comprehensive insurance. But they apparently didn’t read the bill very closely. It’s a recurring theme.

According to the Wall Street Journal, employers and employee-benefits consultants have found, and federal regulators now confirm, that the law actually requires most employers to offer no more than very flimsy coverage. Many employers are now exploring the option of offering limited-benefit health plans that cover preventive services and maybe “$100 a day for a hospital visit” but “wouldn’t cover surgery, X-rays or prenatal care.” Indeed, the law could push many employers to reduce the amount of coverage workers receive on the job.

The Obama administration’s reaction demonstrates they had no idea what they were doing. The Wall Street Journal:

Administration officials confirmed in interviews that the skinny plans, in concept, would be sufficient to avoid the across-the-workforce penalty. Several expressed surprise that employers would consider the approach.

“We wouldn’t have anticipated that there’d be demand for these types of band-aid plans in 2014,” said Robert Kocher, a former White House health adviser who helped shepherd the law. “Our expectation was that employers would offer high quality insurance.”

The Law of Unintended Consequences strikes again.

This and other employer responses to the law could make the roll-out of ObamaCare’s health insurance “exchanges” even more of a train wreck.

  • To the extent ObamaCare’s employer mandate pushes firms to offer bare-bones plans, premiums for plans offered through Exchanges will rise. The healthiest workers will enroll in their employers’ bare-bones plans, but workers who have expensive illnesses (or with dependents who have expensive illnesses) will seek more-comprehensive coverage through the Exchanges. The influx of sick consumers will increase the premiums for Exchange-based plans. Many of these sick workers won’t receive any premium-assistance tax credits or cost-sharing subsidies because their employer’s bare-bones plan will likely satisfy ObamaCare’s definition of adequate – and because the statute forbids those entitlements in the 33 states that have declined to establish an Exchange.
  • Employers are also renenwing their health-benefits contracts early (i.e., before January 1, 2014), which allows them to avoid many of ObamaCare’s regulatory costs for several months. That move could also increase premiums for Exchange-based plans by encouraging workers with high-cost illnesses to seek coverage through Exchanges while healthy workers stick with their employer’s plans.
  • Many employers are also considering self-insuring their health benefits, an arrangement in which the employer bears the risk that is usually borne by the insurance carrier and just hires someone (often an insurer) to administer the coverage. This strategy allows also employers to avoid many of ObamaCare’s regulatory costs and could also increase premiums in the Exchanges and small-group market.

Again, the Journal:

Regulators worry that some of these strategies, if widely employed, could pose challenges to the new online health-insurance exchanges that are a centerpiece of the health law. Among employees offered low-benefit plans, sicker workers who need more coverage may be most likely to opt out of employer coverage and join the exchanges. That could drive up costs in the marketplaces.

These are the sort of unintended consequences that ObamaCare’s opponents warned would plague any attempt by Congress to centrally plan one-sixth of the U.S. economy.

Cannon’s Second Rule of Economic Literacy

…appears at the end of this a poor, unsuccessful letter I sent to the editor of the Washington Post:

After quoting a scholar who expresses the economic consensus that the rising cost of employer-purchased health benefits “means lower wages and salaries,” “New study shows health insurance premium spikes in every state” [Nov. 17] immediately contradicts that consensus by stating, “employers are attempting to shift health costs onto their workers” by “asking employees to shoulder a larger share of the premium.”

If workers bear the cost of employer-paid health benefits in the form of lower wages and salaries, then increasing the employee-paid portion of the premium is not a cost-shift.  Workers would have borne those costs either way.

Employers cannot shift to workers a cost that workers already bear.

See Cannon’s First Rule of Economic Literacy.

Schism in the Church of Universal Coverage

On the Diane Rehm Show last week, I predicted that all the lovey-dovey coalition-forming by the Church of Universal Coverage would fall apart as soon as people started talking about actual reforms instead of vague principles.

Today, The New York Times reports:

Two labor unions have pulled out of a broad coalition seeking agreement on major changes in the health care system.

The action, by the American Federation of State, County and Municipal Employees and the Service Employees International Union, shows the seeds of discord behind the optimistic talk at a White House conference on health care this week.

It also illustrates the difficulty of reaching agreement on two of the knottiest issues in the health care debate: whether to offer a new government-sponsored insurance option, and whether to require employers to help pay for employee health benefits.

I made a similar prediction in this op-ed, where I urged that a new government-sponsored insurance option and mandates are two of three proposals that must be blocked at all costs. The third: price controls.