Independent National Journal analysis finds premiums higher under Obamacare as employers weigh dropping coverage.
By Clara Ritger
Republicans have long
blamed President Obama's signature health care initiative for increasing
insurance costs, dubbing it the "Unaffordable Care Act."
Turns out, they might be right.
For
the vast majority of Americans, premium prices will be higher in the
individual exchange than what they're currently paying for
employer-sponsored benefits, according to a National Journal
analysis of new coverage and cost data. Adding even more out-of-pocket
expenses to consumers' monthly insurance bills is a swell in deductibles
under the Affordable Care Act.
Health
law proponents have excused the rate hikes by saying the prices in the
exchange won't apply to the millions receiving coverage from their
employers. But that's only if employers continue to offer that
coverage--something that's looking increasingly uncertain. Already, UPS,
for example, cited Obamacare as its reason for nixing spousal coverage.
And while a Kaiser Family Foundation report found that 49 percent of
the U.S. population now receives employer-sponsored coverage, more
companies are debating whether they will continue to be in the business
of providing such benefits at all.
Economists
largely agree there won't be a sea change among employers offering
coverage. But they're also saying small businesses are still in play.
Caroline
Pearson, vice president at Avalere Health, a health care and public
policy advisory firm, said there's a calculation low-wage companies will
make to determine if there's cost savings in sending employees to the
exchanges.
"The
amount you have to gross up their wages so they can get their own
insurance and the cost of the penalties may add up to less than the cost
of providing care," she said.
It's
a choice companies are already making. The number of employers offering
coverage has declined, from 66 percent in 2003 to 57 percent today,
according to Kaiser's study.
The
new variable is the penalty employers will face for not providing
coverage, which will start in 2015 after it was delayed earlier this
year. The Health and Human Services Department argued that any increase
in the number of employers that drop benefits would not deviate from the
historical trendline. And, HHS said, employer decisions to drop
coverage might have nothing to do with the ACA. HHS spokeswoman Joanne
Peters said previous health care reform measures have, in fact, reversed
that trend.
"As we saw in Massachusetts," Peters wrote in an e-mail, "employer coverage increased when similar reforms were adopted."
But
others aren't as confident. The drop-off in employer coverage
paralleled an increase in premiums, which rose 80 percent for families
and 74 percent for singles in the last 10 years, the Kaiser study found.
"To
any small employer, it's a no-brainer," said Devon Herrick, a senior
fellow at the National Center for Policy Analysis, a conservative policy
research organization. "If workers can get better coverage that's
subsidized, it makes sense for the employer to stop providing health
insurance."
Whether
the quality of care in the new market is comparable to private
offerings remains to be seen. But one thing is clear: The cost of care
in the new market doesn't stack up. A single wage earner must make less
than $20,000 to see his or her current premiums drop or stay the same
under Obamacare, an independent review by National Journal
found. That's equivalent to approximately 34 percent of all single
workers in the U.S. seeing any benefit in the new system. For those
seeking family-of-four coverage under the ACA, about 43 percent will see
cost savings. Families must earn less than or equal to $62,300, or
they, too, will be looking at a bigger bill.
Those numbers include the generous tax subsidies designed to make the new system more attractive to consumers.
"In
16 states that HHS studied, premiums were on average almost 20% lower
than what the Congressional Budget Office projected," Peters wrote in an
e-mail.
Premiums may be lower than predicted, but they're not competitive with what workers are now paying for employer-sponsored care.
On
average, a worker paid between $862 and $1,065 per year for single
coverage in 2013, according to Kaiser's numbers. For the average family
plan, defined as a family of four, insurance cost between $4,226 and
$5,284.
Fewer
than half of all families and only a third of single workers would
qualify for enough Obamacare tax subsidies to pay within or below those
averages next year.
The
cost of Obamacare will vary by state. But early numbers from state
exchanges--including California, Minnesota, Washington, and Rhode
Island, in addition to those found on Kaiser's online cost
calculator--provide similar estimates, all of which indicate a wide
disparity between workers' contributions to premiums under employer
plans as opposed to Obamacare.
Looking
at single versus family-of-four coverage against the federal poverty
line, low-income households benefit most from Obamacare and the tax
subsidies that defray costs. Those eligible for tax subsidies can make
up to 400 percent of the federal poverty line, equivalent to $45,960 for
one person and $94,200 for a family of four. The data in the graphic is
based on the Covered California calculator, which Senior Vice President
Larry Levitt of Kaiser said is a market "roughly in the middle of the
pack."
In
places where the median family income is higher, the number of people
who benefit from cost savings will be even lower. It's a tough reality
for California, which is home to the largest number of uninsured people
in the country (6.7 million) and therefore viewed as the most important
test for the success of the new federal health law.
The
truth is, Obamacare is doing what it was intended to do: make health
care affordable for the nation's lowest earners by spreading out the
costs among taxpayers.
The trap is that the exchanges also present a savings for some employers but a rate hike for their employees.
And shifting employees to the exchanges also is just logistically easier than trying to meet the law's employer mandate.
Fifty
percent of employers report being "somewhat prepared" to implement the
provisions of the ACA, and an additional 22 percent report being "not
prepared," according to an August 2013 Deloitte presentation to the
National Conference of State Legislatures.
The
report also indicates that, overall, 81 percent of employers "do not
anticipate dropping coverage." Cheryl Smith, senior practitioner at
Deloitte, said that number is likely to change as employers learn more
about the exchanges.
"We're
not going to know who is coming into the exchanges for the next few
years," Smith said. "We also don't know for whom the subsidies will be
most enticing."
The
Deloitte report found several factors that will feed into employer
decisions about dropping coverage. Among them is an assessment of better
benefits in an exchange, a penalty for not providing coverage that is
less than the cost of that coverage, and a continued trend of premiums
rising faster than inflation.
Employers
are also likely to join the exchange if they have a great diversity in
plan offerings in their market. The study found that 71 percent of small
businesses would be more likely to join the exchange in that scenario,
compared with 49 percent of large companies.
Of less importance was what competitor companies choose to do with their health benefits, Deloitte found.
"Will
the exchange feel the same as receiving health benefits from an
employer?" Levitt said. "No. For middle and higher income they would be
paying more than they would with a job with health benefits. But it's
hypothetical, because they don't have a job with health benefits."
Unless they did, before their employer cut it.
Perhaps
the biggest obstacle Obamacare faces today isn't getting people in the
system, but making sure those who do get in actually receive affordable
care.
SoRo, I'll say it again: Health insurance =/= Healthcare.
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