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On Employer-Based Insurance, A Swing and a Miss for Obamacare


Will Obamacare stop your employer from giving you healthcare?  Yesterday a report came out showing that the number of Americans receiving insurance from their employers has been declining since 1999. A debate is raging in the press on whether Obamacare will accelerate this trend.

piece in the WSJ profiles three small business that are contemplating paying the penalty for non-compliance with Obamacare rather than offering their employees insurance. On the other hand, a survey by the International Foundation of Employee Benefit Plan says that 70 percent of businesses will “definitely” offer employee insurance next year, a 23 percent increase from last year’s survey.

Like everyone else in America including the President we don’t really know how Obamacare will work out, but what is notable is how all sides agree that it would be a failure if the health care law decreased employer-based insurance. Conservative critics of the law have long claimed that the ACA would cause a massive exodus of employers out of the insurance market. Liberals, in defense of Obamacare, have been skeptical.

Both sides are right to be worried about Obamacare’s effect on my employer-based insurance. But the reasons why we should be worried are more complicated than they let on.

The country’s current reliance on employer-based insurance isn’t the best possible way to go. Centering insurance around the traditional workplace is a blue model practice that assumes a world of full time workers in long term stable jobs. That world no longer exists. Today people break from this model in all sorts of ways, from changing jobs more frequently to taking on more part time work to pursuing creative startups or self-employment. Under these conditions, moving away from an employer model just makes good sense. So, theoretically, replacing employer based coverage could be a good thing.

But the transition away from employer insurance should be orderly and intentional, with an effective structure in place to help low-income people cope with their insurance costs. That isn’t what’s happening now. Obamacare’s employer mandates are aimed at cementing the existing system in place, but it looks as if many employers will be gaming the law to slough off as much of the insurance burden as possible. We could well end up with the worst of both worlds: an employer-based system that sheds as many workers as possible and is increasingly unsuited to a world of job hoppers and part timers.

It is, of course, much too soon to tell. Congress succeeded in passing a major reform without understanding how it works and at this point we are reduced to hoping that things work out for the best.  There are lots of good intentions in Obamacare, but as George W. Bush learned in Iraq, good intentions aren’t always enough.

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  • Andrew Allison

    “. . . but what is notable is how all sides agree that it would be a failure if the health care law decreased employer-based insurance.” The thrust of the article is not whether but by how much it will be reduced. QED.
    And this without getting into the other problem which you have addressed in the past, namely why would anybody who doesn’t have employer-based insurance pay for insurance until they need it?

  • Jim Luebke

    What one survey giveth, another taketh away…

    Read the rest of the article. Another survey correlated cost increases to coverage reductions. And employers expect ACA to raise their costs — about half expected costs to go up by 1-4%, and one out of six expected the costs to go up by more than 10%.

    That’s two-thirds of employers who expect their costs to increase, without even including employers who expect costs to increase in the 4-10% range! And with higher costs comes lower coverage rates, however many employers “offer” insurance.

    I’m surprised VM missed the critical point so completely here. Hasn’t the thrust of most healthcare articles here been that we need to *reduce* costs?

    ACA has failed, in that, and that’s unambiguous.

  • Lorenz Gude

    Yes, we are still suffering from the unintended consequences of employer funded health care that grew out of WW2 wage controls. It is eminently arguable that it cost us GM and Chrysler. But the elephant in the room is that we are already paying twice as much as other countries to get the same or slightly worse health outcomes. It is simply moving the deck chars around on that famously sinking ship to worry about exactly how we will sustain the unsustainable.

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