Goodbye, US employer sponsored insurance

Millions of American workers could discover that they no longer have employer provided health insurance as ObamaCare is phased in. That's because employers are quickly discovering that it may be cheaper to pay fines to the government than to insure workers, says John C. Goodman, President, CEO and the Kellye Wright Fellow of the National Center for Policy Analysis.

AT&T, Caterpillar, John Deere and Verizon have all made internal calculations, according the House Energy and Commerce Committee, to determine how much could be saved by a) dropping their employer-provided insurance, b) paying a fine of $2,000 per employee, and c) leaving their employees with the option of buying highly-subsidised insurance in the newly created health insurance exchange.

  • AT&T, for example, paid $2.4 billion last year to cover medical costs for its 283,000 active employees.
  • If the company dropped its health plan and paid an annual penalty for each uninsured worker, the fines would total almost $600 million.
  • But that would leave AT&T with a tidy profit of $1.8 billion.

    Economists say employee benefits ultimately substitute for cash wages, which means that AT&T employees would get higher take-home pay. But considering that they will be required by federal law to buy their own insurance in an exchange, will they be net winners or losers? That depends on their incomes, says Goodman.

    In Massachusetts, people who get subsidised insurance from an exchange are in health plans that pay providers Medicaid rates plus 10 per cent. That's less than what Medicare pays, and a lot less than the rates paid by private plans. Since the state did nothing to expand the number of doctors as it cut its uninsured rate in half, people in plans with low reimbursement rates are being pushed to the rear of the waiting lines, says Goodman.

    The Massachusetts experience will only be amplified in other parts of the country:
  • The Congressional Budget Office (CBO) estimates there will be 32 million newly insured under ObamaCare.
  • Studies by think tanks like Rand and the Urban Institute show that insured people consume twice as much health care as the uninsured.
  • So all other things being equal, 32 million people will suddenly be doubling their use of health care resources.
  • In a state such as Texas, where one out of every four working age adults is currently uninsured, the rationing problem will be monumental.

    Ultimately, we could see a complete restructuring of American industry, with firms dissolving and emerging based on government subsidies, says Goodman.

    Source: John C. Goodman, Goodbye, Employer Sponsored Insurance, Wall Street Journal, May 21, 2010.

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    First published by the National Center for Policy Analysis, Dallas and Washington, USA

    FMF Policy Bulletin/ 25 May 2010
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