In 2014, millions of Americans — possibly 25-30 million — who have employer-provided health insurance will lose it thanks to Obamacare’s requirement that all plans cover what Washington deems “essential benefits.” Some employers will consider that unaffordable and drop coverage altogether when their current, less costly plans expire sometime this year. These new victims of Obamacare are in addition to the 6 million who bought plans in the individual market and had them canceled as of January 1.
The plight of those 6 million made headline news and caused the first cracks in the Democratic Party’s support for the law. The coming wave of workplace cancellations will force Democrats to defend a law that will likely harm twice as many people as it helps.
That’s right. Twice as many probably will lose coverage in 2014 as will gain it.
The Congressional Budget Office projects 16 million will gain coverage through the law’s Medicaid expansion and subsidized exchange plans. That’s a best case scenario, rosier than the enrollment figures we’ve seen so far, but still half the number losing coverage.
There were warnings of this workplace disaster. In 2011, McKinsey & Company, management consultants, warned that nearly one third of employers surveyed were considering dropping coverage in response to the law.
Employers who self-insure are not affected by the “essential benefits” requirement, but employers who purchase coverage in the small group market for about 60 million people altogether are clobbered.
The one-size fits all requirement adds a whopping $1.79 an hour to the cost of a forty-hour-a-week employee, and over $2 an hour in New York and New Jersey, where health plans are more expensive, according to economist James Sherk of the Heritage Foundation. It’s one thing if you’re paying lawyers and accountants, but unaffordable for waiters and receptionists. Those are among the 25 to 30 million who will lose coverage.
Michael Kennedy, who runs two dog grooming salons near Albany, New York, said the requirement doubles his insurance cost from $133 to $326 per month per employee, eating away at his small profit.
Employers with fewer than fifty full-time employees will be the first to drop coverage, when they see the new, higher premiums. Organizations with fifty or more full time workers are in a different spot, because there is some possibility that they would eventually be fined for dropping coverage. The Affordable Care Act says these employers shall provide coverage starting January 1, 2014. The president delayed it (without legal authority) until January 1, 2015, and it may never happen. Nevertheless, employers are preparing in case it does.
Last year at this time, public and private sector employers began pushing full-time workers down to part-time status and avoiding full-time hiring. An astounding 77% of hires in the first seven months of 2013 were part-time. Once the president delayed the mandate, full-time hiring bounced back. But the possibility of the mandate is likely to cause a repeat of last year’s problem.
If the mandate goes into effect, employers with over fifty employees will have to either provide the “essential benefits” and pay fees levied on covered employees by Obamacare and cope with federal reporting requirements —
OR they will have to drop coverage and pay a $2,000 penalty per uninsured employee (after the first thirty). The penalty adds 98 cents an hour to the cost of a worker, instead of $1.79 or more.
It’s not a bargain, however, for most employees losing coverage. Workers with on-the-job coverage contribute $999 year in pre-tax dollars on average and have an average deductible of $1,135 for individual coverage, according to the Kaiser Family Foundation. On Obamacare exchanges, all but the lowest earners will pay more, even after subsidies, pay with after-tax dollars, face deductibles of $3,000 to $5,000 for silver and bronze plans, and lose access to many doctors and hospitals.
Finally, add to the losers’ column the 3.1 million workers in fast food and other low-margin industries who had mini-med plans but lost coverage as of January 1, 2014, because Obamacare regulations bar these plans.
All in all, the toll of those losing coverage in 2014 probably will reach 30 million. And most will find Obamacare an unaffordable and low-quality alternative.