Obamacare’s health insurance exchanges open for business Nov. 1. Millions of Americans will soon have to log on to the digital state or federal marketplace to pick their plans for 2016.
They’re in for a rude awakening. Obamacare is set to make insurance a lot more expensive next year. The law will increase its punishment for those who don’t obtain insurance. Many who do buy coverage on Obamacare’s exchanges will face premium hikes as high as 49 percent. Thousands of medium-size employers, meanwhile, will for the first time be subject to penalties if they do not offer coverage to their employees.
Currently, the tax penalty for going without insurance coverage — known as the individual mandate — is the greater of $325 per person or 2 percent of one’s income. Come January, that penalty will more than double to $695 or 2.5 percent of one’s income, whichever is larger.
But even this hefty fine won’t do much to increase enrollment. That’s because it will still be less than the cost of an average, mid-level “silver” exchange policy.
So the higher penalty is unlikely to persuade the millions of people who have so far refused to purchase coverage to change course next year. They’ll just be paying considerably more for their choice.
The Obama administration knows many people won’t sign up. The White House just announced a modest goal of getting 10 million people to enroll in the exchanges in 2016 — only 900,000 more than the number expected to be enrolled by the end of this year. Never mind that the Congressional Budget Office predicted in June that 20 million people would sign up in 2016.
What’s more, the gap between the individual mandate penalty and the cost of an exchange policy will only grow.
Premiums are set to skyrocket next year. Minnesota’s largest insurer will raise rates in 2016 by 49 percent, on average. Oregon’s largest provider of exchange plans has announced an average premium hike of 25.6 percent. Kentucky’s biggest exchange insurer will follow suit with an average increase of 25.1 percent. And Tennessee’s regulators have approved increases averaging 36.3 percent for the state’s Blue Cross Blue Shield affiliate.
Then there are the new costs that 2016 will have in store for businesses.
Obamacare’s employer mandate, which requires companies to provide affordable health insurance to their workers or pay fines, will take full effect next year. Currently, only firms with 100 or more workers had to comply with the rule. But starting Jan. 1, 2016, businesses with 50 or more full-time workers will have to furnish coverage for at least 95 percent of their employees.
This mandate will cost companies dearly. It requires them to cover employees’ adult children up to age 26. What’s more, an employee’s share of the premium can’t amount to more than 9.5 percent of his or her income — Obamacare’s arbitrary definition of what makes care “affordable.”
Employers who don’t provide coverage will face fines of $2,000 for every full-time worker after the first 30, if at least one receives a subsidy through the exchanges. If an employer doesn’t provide coverage that’s considered affordable, he must pay the lesser of $2,000 per staffer, minus the first 30, or $3,000 for every employee who gets a subsidy through Obamacare’s exchanges.
The mandate effectively raises the cost of employing full-time workers. So businesses will hire fewer people and cut back further on hours. Hundreds of employers — ranging from SeaWorld to Wendy’s to North Carolina State University — have already done so the past few years. A new crop of medium-size employers will surely join them.
The combination of punishing individual and employer mandates, together with higher premiums and deductibles, will have ripple effects throughout the insurance sector and the entire economy. Already, more than 6 million people are working part-time involuntarily.
America’s health system, in other words, will look even worse in 2016 than it does today, thanks to Obamacare. By that time, the chorus of supporters currently singing the law’s praises might finally change their tune.