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Obamacare Is Destroying Employer-Based Health Plans


When Obama was campaigning on behalf of his health care law one mantra was repeated ad nauseam: If you like your current plan, you can keep it. To put it gently, this hasn’t turned out to be the case, as more and more employers are opting to drop health coverage for their employees, pushing them onto the insurance exchanges. We’ve already covered the grocery chain Wegmans going this route; now IBM has announced plans to push more than 100,000 retirees off the company health plan and onto Medicare exchanges. The Wall Street Journal reports:

Instead of subsidizing retiree health premiums directly, IBM will give retirees an annual contribution via a health retirement account that they can use to buy Medicare Advantage plans and supplemental Medicare policies on the exchange, as well as pay for other medical expenses. Retirees who don’t enroll in a plan through Extend Health won’t receive the subsidy. […]

Few employees can now count on big companies to provide retirement health care. Only 28% of large companies that offer health benefits to employees offered retiree coverage in 2013, down from 34% in 2006 and 66% in 1988, according to a 2013 survey by the Kaiser Family Foundation.

This is huge. Far from being a status quo law, Obamacare has become a weapon of mass destruction against traditional employer plans.

From one point of view, this may not be such a bad thing. A number of wonks on both the right and the left have argued that employer-based insurance is actually a bad thing. It’s certainly true that employer-based plans tie workers to their jobs at a time when our economy increasingly needs to be characterized by entrepreneurialism and rapid change.

But this, unfortunately, was not how the ACA was sold to the public, and Americans who believed the administration’s sales pitch are soon going to notice and be none too pleased. When this happens, the blowback will generate another wave of reform that might end up undoing some of the ACA’s genuinely good points.

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  • Jane the Actuary

    Uh, no. IBM isn’t pushing its employees into public exchanges — it’s continuing its retiree medical subsidy (which is a fixed amount anyway) in a “private exchange” arrangement where a third-party provides a “marketplace” in which retirees can choose from multiple insurers rather than just the one or two that the company has negotiated a contract with.

  • AnnSaltzafrazz

    I continue to see the bright side of this. Breaking the employer-health insurance chain is a good thing. People should be free to move between jobs, and employer-based health insurance has been an obstacle to that. When the dust clears, I hope we end up with a private system of individual insurance, independent of employer.

    • Kevin

      In the long term this may well work out ok. In the short-medium term it’s a hit to employee compensation, especially in such a loose labor market. The policy wonk side of me knows it’s the right thing to do; the employee side of me sees the hit to my income coming.

    • cubanbob

      If you want to break the tie then the only way is to tax the employee the value of the coverage as an additional compensation. Good luck with that. As it is the way things are going with more and more employers dumping their employees on to exchanges that well maybe the new normal-a de facto way of breaking the tie and taxing the workers.

  • Loader2000

    I’m one of those who thinks employer based health care is a really bad idea. It contributes to the insulation of customers to price by subsidizing anywhere from 2/3 to 3/4 of the cost such that companies like Kaiser only seem like a marginally batter deal than Blue Cross, while, in reality, it is significantly better deal. As far as misleading the public, well, I don’t think the president has anything against an ends justify the means strategy. However, I hope for his sake that this is what he actually intended. It might not matter much if Hillary can use this kind of accidental (or deliberate) deception as a way to say, “Hey, I’m different from Obama, vote for me.”

  • E.G. Lim

    The lies surrounding Obamacare are so thick, so blatant, so bald-faced…it’s stunning the hubris of those who continue to peddle the so-called ACA.

    Let me see how this works. First you lie to us, then you tell us the plans we want to keep, that we will now lose because people were hoodwinked by your lies, are really, actually no good anyway…so we should just move on…??

    • Corlyss

      Just trust ’em, E. They’re the apparatchiks. They know what’s best for us. And even if they don’t, we’re racists to disagree and therefore deserve no better.

  • bpuharic

    IBM has also had a unionized workforce, which was supposed to be the kiss of death, according to the right.

    And there are 150,000,000 workers who aren’t IBM retirees.

    • cubanbob

      150,000 workers to cover 100,000 retirees can’t end well.

  • Corlyss

    Apparently that was one of the hidden goals of the legislation, breaking the nexus between employer and employee health care. Surprise, surprise. If it didn’t screw up the rest of us so horribly, I’d say such a development was a boatload of karma smacking the venal, corrupt, and criminal unions square in the chops.

  • Boritz

    ***It’s certainly true that employer-based plans tie workers to their jobs at a time when our economy increasingly needs to be characterized by entrepreneurialism and rapid change.***

    Doesn’t apply to retirees. The last thing you want at this stage of life is for expectations you have held and worked towards for decades and indeed achieved to be screwed with like this. The broken promise at the top is the progenitor of a million other broken promises. I’ve always believed it is below the belt to change the retirement rules when someone is on the verge of retiring. All the worse to jack around the already retired.

  • Jacksonian_Libertarian

    “ACA’s genuinely good points”

    I find it significant that no good points are mentioned, and that only one of the bad points is covered in the article. I can’t help but think that we don’t even know what all the bad points are yet. As an example, full time work that is paid at an hourly rate, is already disappearing, and Obamacare hasn’t even been implemented yet. When it is, businesses that employ full time hourly workers will be at a competitive disadvantage to those that don’t, and will be forced to cut hours or go out of business. 4 hourly workers working 30 hours per week, are cheaper to employ than 3 workers working 40 hours per week, because no healthcare need be provided to part-time workers, and the business still gets 120 man hours of work. We can also expect to see many businesses converting salary positions, into part-time hourly positions because of the cost savings in not paying for healthcare.

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