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Will Obamacare Cause Employers to Drop Health Coverage?

While selling his healthcare overhaul, Obama repeatedly reassured skeptics with a promise: If you like your current plan, you can keep it. Some workers may soon find out this isn’t exactly true. As companies, particularly small businesses, face rising healthcare costs under the new law, consultants are beginning to advise them to drop healthcare when the new exchanges go into effect in 2014. The Wall Street Journal has the story:

Whether the health-care overhaul will prompt employers to drop their health insurance is a subject of intense debate. Several studies have found that most employers don’t expect to do so once workers have the option of buying policies through insurance exchanges, set to begin in 2014. But consultants say employers with lower-wage workers may be more likely to shift workers to exchanges. . . .

The committee reported that Southwest Airlines said in its employee magazine of June 2010 that it expected the law to increase its costs. At a presentation made to Southwest in July 2011, benefits consultant Mercer told the company that under the new system it could expect to pay $414 million a year to provide health care for workers, or drop coverage entirely and instead pay $111 million in penalties.

Thus far, no major company has said that it plans to drop health coverage for its workers, despite the potential for savings. Yet these reports should still be very troubling to the law’s supporters. If Mercer’s calculations are right, a number of companies stand to gain significantly by dropping coverage. Once the exchanges are up and running, companies may find these savings harder to resist, especially if they run into financial difficulties.

It is still too early to say exactly what impact such a massive law will have on one of the most complex healthcare systems in the world. But it’s sure to be a bumpier ride than the president has let on.

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  • thibaud

    The result would be backing into what should have been the chief aim from the start: single payer, supplemented by private insurance purchasable across state lines.

    The irony of ironies here is that, in contrast to our Rube Goldberg health insurance system, single payer is the true pro-business solution. No other advanced nations’ corporates have to compete with such a huge monkey on their backs.

    In the auto industry, the monkey adds iirc about $1500 to the cost of each Big 3 (2.5?) automobile – which is probably why US automakers have to substitute so much plastic for metal in their auto parts, further putting them at a disadvantage against the Japanese and Germans.

    But the real tragedy of linking insurance to employment status is the drag on hiring it creates. Imagine how many jobs would have been created had our big employers not had to spend many thousands, directly in contributions and indirectly on admin, on their employees’ health benefits.

    I haven’t run the numbers, but I suspect that eliminating deductions on employer contributions would go a long way toward funding the provision of catastrophic insurance and prescription drug cost reimbursement for the entire population. Ending the hedge-funders’ “carried interest” scam would supply much of the remaining billions needed.

    You could then offer households a modest tax deduction for some part of the cost of private insurance that would top up the federally-provided universal catastrophic and prescription meds insurance. Maybe $2,000 for people under 35, $3000 for older people and some higher flat fee for families.

  • Kenny

    Like all ‘the ends justify the means’ leftists, BHO is a liar.

  • thibaud

    What a colossal waste of time effort and money has resulted from both parties’ desperate efforts to avoid single payer!

    Our own neighbors to the north, and every advanced industrial nation, has figured out that expanding the risk pool to the maximum is the most logical and efficient way to provide decent health insurance to the largest number of citizens.

    Only our elites’ terror of the private health insurance mafia can explain the absurd contortions we have gone through to delay the inevitable shift toward a single payer system supplemented with a national market for additional, optional private insurance.

  • thibaud

    If SCOTUS strikes down Obamacare in toto, there will be huge momentum for replacing it with single payer.

    Were Obama to summon more courage and cunning than he did with his botched, neither fish-nor-fowl pass at health insurance reform, he’d embrace single payer before the election.

    This would put Romney in a terrible bind: having to disavow his own half-hearted healthcare reforms and embrace the stupid, casually cruel, insanely wasteful status quo.

    At a minimum, the issue would finally be put directly to the American people to have it out and decide it for good. The case for single payer is easy to make: it’s the only pro-business, pro-family solution for America.

  • vanderleun

    “But it’s sure to be a bumpier ride than the president has let on.”

    Really? No kidding? Who knew? Breaking news! Stop the presses! Forehead slaps all around!

  • Anthony

    Health care in America is a robust and growing sector of immense size, scope, and scale’ Thibaud is right: absurd contortions must be made to imply blame solely on health care reform debacle (Obamacare) as root of our coverage crisis – cf. special interest. Employer provided health care coverage is heavily subsidized because it is tax-deductible and doctors are reimbursed for the procedures and services they offer, not for the health outcomes that result; similarily, hospitals in America do not get paid more money if they do great work and are completely infection free – again Thibaud has it right: what a waste of time, effort, and money.

  • alanstorm

    thibaud, you fail to make your case.

    “All the cool countries are doing it!” is not an argument.

    “The case for single payer is easy to make: it’s the only pro-business, pro-family solution for America.” That’s an assertion, not a fact, backed up nowhere in your posts.

    I have an alternative option:

    (A) Allow individuals to write off their health insurance and health care costs. Period.

    (B) Eliminate restrictions on selling insurance across state lines.

    (C)Eliminate governmental mandates on what health insurance must cover.

    (D) Get government out of the health care industry. Medical costs started to outpaced general inflation back in the late 60’s, when Medicare and Medicaid were passed. Coincedence? Don’t be naive.

    (E) Get rid of the bizarre linkage of Medicare with Social Security.

    (F) Stop forcing people to sign up for Medicare. Are you aware that you don’t get a choice?

    Obviously, there would have to be a transition period, because of government’s great success in infantalizing the public and making them dependent, but there’s no reason to wait.

    Nice strawman, by the way, to equate “no single payer” with “status quo”.

    What will you do after high school?

  • alanstorm

    thibaud, I’ve decided that you must be a paid political agent. No mere human could possibly string together so many strawmen, half-truths, unfounded assertions and outright [profane allusion removed] as concisely as you have.

  • Bart Hall (Kansas, USA)

    I’m a dual citizen of Canada and the USA. One reason I left Canada over twenty years ago was its awful health care system. Here’s a more recent example of what Monsieur Thibaud purports to praise…

    A couple in Calgary was pregnant with quads. In Calgary, a city the same size as Kansas City, they could not guarantee four NICU (=neo-natal ICU) beds. In Kansas City there are over 300.

    No luck either in Edmonton, also 1.5 million, or Vancouver (2 million) or even in Toronto (4 million) or Montréal (3 million).

    So the family drove to Great Falls, Montana, population 55,000, where they had no problem finding enough NICU beds to ensure the proper care of their babies.

    And you think we should imitate that system? IDIOT.

  • Luke Lea

    I hope thibaud is right in his comments above, that this is a way of backing into single payer.

  • thibaud

    alanstorm – not sure that it’s worth responding to such puerile jeers and ad hominem insults, but I’ll point out the silliness of one of your many silly points:

    (A) Allow individuals to write off their health insurance and health care costs. Period.

    Assuming that “period” implies there is no other legislation beyond this, tell me how are said individuals supposed to get insurance if they have, in the private health insurance jargon, a “pre-existing condition”?

    Where is the logic in a national healthcare system that denies insurance altogether to millions people who, through utterly no fault of their own, desperately need it?

    Mind you, I’m not expecting a rational, grown-up or respectful conversation from you; I’m really just pointing out to the other readers how stupid and casually cruel our current kludge of a system is.

  • alanstorm

    thibaud, [excessively ill-tempered remarks deleted] “Assuming that “period” implies there is no other legislation beyond this, tell me how are said individuals supposed to get insurance if they have, in the private health insurance jargon, a “pre-existing condition”?”

    [Demeaning identifier deleted], all of the comments I made would require legislation. Or did you not grasp that fact? The difference is that I propose legislation to REMOVE barriers, rather than bind us closer to the federal teat. Pre-existing conditions are an issue, to be sure, but one important enough to justify a single-payer system? No. Health care is a textbook example of government creating “solutions” which are so bad that they inevitably require more “solutions” to fix the first ones, ad nauseum.

    Mind you, [personal remarks deleted]… Nice use of the same strawman, by the way: Assuming (despite the changes I listed) that I want the status quo.

    You have no clue what you’re asking for. If you want single-payer, why don’t you move to a place that has it?

    [Note from curator: we aren’t going to work this hard to edit comments to fit our requirements. There is no need for discourtesy, even on the web.]

  • Cromwell

    The firm for which I work has for the last 20 years covered all employee health care out of its own pocket. Next year employees will be required to contribute. A fairly paltry sum, but it’s the end of one of the things the firm prided itself upon. the memo announcing this from the chairman and president said it was due precisely to the uncertainties and higher costs wrought by Obamacare.

  • Corlyss

    “Will Obamacare Cause Employers to Drop Health Coverage?”

    Well, if it doesn’t it will have failed in its principal goal. No matter how convoluted Obamacare is, or how much the Dim denizens claim otherwise, the intent was always overtly or covertly to force Americans into one-size-fits-all health care so the Lib/Progs could finally achieve their #1 wet dream for over a century.

  • Douglas

    I do not agree that a national health service is where we are headed. No one who knows anything would want the NHS in the US.

    What we are talking about is subsidizing health care for the poor and working class. That may be appropriate, but why it should be necessary to give everyone else second class health care to do that is beyond me.

    Here’s a better solution. End the tax deduction for employer-paid health insurance. That ends all the distortions and moral hazard of the current system. Let everyone buy their own health insurance or do without. The more affluent will have better insurance and better health care. So what? The government will provide subsidies for the poor and working class, and they will get health care without the gold plating – they’ll get NHS quality health care, in other words, with waiting, lines, rationing, etc. That’s life, and it’s better than not any health care at all. But why anyone thinks that the majority of people who can afford better would accept that as the price of providing minimal services to the poor is beyond me.

  • vanderleun

    “Were Obama to summon more courage and cunning than he did with his botched, neither fish-nor-fowl pass at health insurance reform, he’d embrace single payer before the election.”

    I join you in that wish but only because it would doom Obama in the general like nothing else he could possibly “embrace” — and that includes the infamous and apocryphal dead girl or live boy.

  • Anthony

    WRM, reading comments and reflecting on public policy brings to mind that much is at stake in the public policy that is made by officeholders – who will pay the taxes, who will receive benefits, who will feel aggrieved, etc. The import of which reveals that the mere running/campaigning for “office” has become quite an industry in the economic sense – gives employment to many people (bloggers, web sites, cable T.V., radio personalities, researchers, pollsters, pundits, talk show hosts, writers, etc.) who are perhaps unwittingly tied to blue model. So at one level, Democracy (i.e. elections) has become economic component of blue model while beguiling the electorate – how about that for a bumpy ride.

  • Bart Hall (Kansas, USA)

    Thib … How do people get insurance with pre-existing conditions? They apply for it. Our entire family (including children) is covered under Blue Cross for way less than $3,000 per year, and my wife has a cancer history. All preventative medicine is covered and we receive a huge discount on everything else.

    Kansas does not have a “guaranteed issue” rule. Many states already do, and their insurance is twice the cost, but it *is* available for people with pre-existing conditions.

  • Tom

    And you did not address any of the other arguments he made, nor Mr. Hall’s anecdote, not even to point out the hit-and-miss nature of anecdotal evidence.

  • thibaud

    Another possible spur to single payer, or Medicare extended to the entire population, may well be Chief Justice Roberts.

    In a very shrewd TNR essay last month, centrist Bill Galston noted that Roberts may well try to avoid the impression of political favoritism that will result from a 5-4 ruling against Obamacare by writing a very narrow majority opinion that upholds the technical objection to the mandate while explicitly disavowing any problems with Congress using its tax authority to intervene much more aggressively in the health insurance market.

    In other words, the killing of the mandate may also give a boost to tax-funded single payer.

    Change will come, as WRM would say. Bring it on.

  • Bebe

    I’ve always considered it one of more amusing ironies of U.S. politics that it was a Republican initiative to create a national health insurance: Theodore Roosevelt during his Bull Moose Party days first proposed a national health insurance in 1912. Much later, against Sen. Ted Kennedy’s universal federal health insurance plan, Pres. Nixon countered with a low-income health insurance, a requirement for businesses to provide all employees with health care, and a commitment to greater use of HMO’s.

    Attempts by Democratic presidents like F.D.R. and Truman were held up by fears of communistic (USSR) and socialistic (Europe) takeover of the American way of life. Pres. Clinton’s forays were undone by his own hubris.

    It’s equally a curiosity to me why the 1937 SCOTUS case of Stewart Machine Co. v. Davis has not been raised in reference to the Obama healthcare plan, particularly as the Supreme Court now considers the plan. In that case the Court upheld Social Security by ruling that Congress had the power to spend to protect the commonweal, and thus also to fashion the definition of that commonweal depending upon the situation. Opposition to Pres. Obama’s plan has included the alleged unconstitutional usurpation of States’ rights by the Federal Government. Yet that particular SCOTUS case focused on Tenth Amendment concerns. And the issue of the constitutionality of Social Security was clearly deemed to pass such a constitutional muster.

    Thus for the last hundred years has the U.S. maintained its approach-avoidance response towards this issue which in many ways affects the life, liberty, and happiness of our commonweal. We ought to remember that our American tradition of jurisprudence considers the Amendments not merely in isolation, but also within the broader scope of those very few words of the Preamble- one clause of which has the purposive intent “…to…promote the general Welfare….” Otherwise, we become pharisaical in sanctifying the Letter but never the Spirit of our Constitution. I cannot say if such views concord with the current makeup of this Supreme Court.

  • thibaud

    @Tom – I’ve found it to be a big waste of time to respond to screamers (all CAPS) who indulge in playground name-calling.

    @Bebe – please post more. Fascinating, and very odd indeed that Republicans would turn their backs on one of the core programs that smart conservatives on both sides of the pond have viewed ever since Bismarck’s day as a necessary attribute of a well-functioning capitalist system.

    I would think that the corporate sector will follow Justice Roberts’ lead, or wink and nudge, and begin coming around to the wisdom of single payer. Without it, corporates will continue to seek ways to grow without hiring Americans, and perpetuate this jobless recovery.

  • Kris

    thibaud: “I’ve found it to be a big waste of time to respond to screamers”

    What about people who conflate health care and insurance? For example: “a national healthcare system that denies insurance altogether to millions people who … desperately need it”. And insurance companies that look askance at “insuring” pre-existing conditions? how shocking!

  • thibaud

    Give it up, Kris. The horse is out of the barn on this one. Even the GOP leadership (plus 67% of registered Republicans and 80% of Americans overall) recognizes that the “pre-existing condition” exclusion isn’t defensible.

    It’s a ridiculous giveaway to a piggish lobby whose members are notorious for dreadful service, administrative bloat, and atrocious corporate governance, and there’s no way, Obamacare or no, that this scam will be resuscitated.

    Another irony: funny that the same people who piously mouth their commitment to entrepreneurs and small businesses would be so determined to preserve this huge, needless impediment to those who wish to leave a large corporate job and start their own company.

  • Kris

    “the pre-existing condition exclusion isn’t defensible”

    So if I discover I have cancer, I should be able to go up to a for-profit company and demand that they provide me with “insurance” against it?

    “funny that the same people who piously mouth their commitment to entrepreneurs and small businesses would be so determined to preserve this huge, needless impediment”

    Funny that the same person who sanctimoniously deplores the poor argumentation of his critics repeatedly purports to believe that the only alternative to the status quo is his own policy prescription.

  • thibaud

    Kris – that’s a red herring. We’re not talking about adverse selection. We’re talking about the deliberate, routine denial of insurance to millions of Americans who – emphasis – ALREADY HAD INSURANCE from another carrier when the condition was diagnosed. Every year, this happens to literally hundreds of thousands of Americans. Even the attempts to “reform” this scandal are a joke: they typically require a waiting period of a year or more before the carrier has to pick you up. Obamacare’s half-hearted copout requires six months.

    As I say, the system’s casual cruelties are, as WRM would say, the wonder of the civilized world.

  • Kris

    “We’re talking about the deliberate, routine denial of insurance to millions of Americans who – emphasis – ALREADY HAD INSURANCE from another carrier when the condition was diagnosed.”

    So if I have health insurance, get cancer, and then decide that another carrier offers a plan that’s better for me, that new company should be forced to offer me insurance as if I were healthy?

  • thibaud

    No. The situation is that, as people _change jobs_ – or lose a job and find a new one – they therefore in our employment-linked system,change carriers and plans. It’s common practice in this country for carriers to deny the new applicant insurance on the basis of a condition diagnosed while he was enrolled in this previous plan.

    You persist in pretending that the norm here, the dominant behavior, is adverse selection. It is not. It is insurers seeking to cherry pick the lowest risks and thereby punishing people who are NOT trying to game the system.

    Our kludge of a system encourages this and rewards it. The results are disastrous for everyone except the private health insurance mafia.

  • Kris

    Ah, so it turns out that the actual problem is that one’s insurance carrier is not a matter of choice but rather is tied to one’s employer. And yet you persist in pretending that the only alternative to this kludge of a system is single pay.

  • thibaud

    ? ? ? What on earth are you talking about? This isn’t a matter of “choice.” When _none_ of the carriers will provide an individual family with insurance – for no other reason than that they can get away with it – that family _doesn’t have_ a choice!

    Sorry – I don’t mean to be harsh – but it’s pointless to keep engaging with you when you insist, post after post, on ignoring this simple reality faced by millions, persist in attacking a straw man of your own imagination, and close by willfully ignoring my repeated posts (first line in #1, last line in #3, above) in favor of single payer supplemented by optional private health insurance offered across state lines.

  • Kris

    I state that “one’s insurance carrier is not a matter of choice”. You then figuratively get red in the face and berate me that people don’t have a choice. “???” indeed. How did you in any way whatsoever address my point, unless you think my point is that the current system is perfect?

    “it’s pointless to keep engaging with you”

    Funny, you’re echoing my feelings. Here’s a last attempt to clarify things for you:

    My attitude (and that of other commenters on various threads):
    (i) The current system as it has evolved has problems, and changes should be made.
    (ii) These changes should involve freeing up the insurance market.
    (iii) No system is perfect.

    You seem to agree with (i), but cannot seem to fathom that anyone would dare not recognize a state-run insurance as being THE solution. You have repeatedly heaped scorn on anyone promoting (ii) as being an obtuse defender of the status quo. This while counterfactually holding up the American system as uniquely flawed. And after all this, you stomp your foot and complain about your opponents’ attitude?

    Shorter version: Yes, I understand that you want a state-run insurance. Now do you understand that there are free-market-oriented changes to the status quo being proposed, and that it is not intuitively obvious that they are worse than your proposed solution? Because you’ve been doing a pretty bad job at conveying such an understanding.

  • Sherrie Otto

    Many people without insurance didn’t want to have any money taken out of their paychecks to help pay for it. Our company has always taken a little bit out of our paycheck to help pay for our health insurance which we don’t mind. My son however didn’t want to lose a penny of his pay for insurance then when he needed it complained of the cost of medical treatment. The drawback to Obamacare is that now with the new rules they had to raise our deductible to $5000 before they kick in a penny. That is a lot of money out of our pocket now which doesn’t include the money taken out for the insurance premium. We can thank Obama for that one. I hope he is booted out so far this November that no one will hear from him ever again. It will be a fight though since the Black Panthers and other groups are gearing up to make sure Obama wins.

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