The New Year isn’t shaping up to be a particularly happy one for the 154 million Americans who receive health insurance through their employers.
Premiums for the average employer-sponsored family plan have climbed to a record high of $17,545, according to a recent Kaiser Family Foundation study. That’s an increase of $4,865 since President Obama first won election. And the price hikes show no signs of abating.
Obamacare deserves much of the blame. The president promised that his health reform push would reduce premiums “by up to $2,500 for a typical family.”
That’s a $7,000 gap between President Obama’s promise and today’s reality. And it results from fatal flaws in the health law’s design. Obamacare places costly mandates and taxes on insurance companies. Insurers pass those costs onto employers — and ultimately, employees — in the form of higher premiums and deductibles.
Obamacare is saturated with mandates. Among the ones that inflate employer-sponsored premiums the most are those concerning “essential health benefits.” In short, the EHB mandates that all individual and small-group — read “small business” — plans cover 10 types of medical services, including mental health and maternity care.
The extra benefits are nice for the patients who receive them. But they’re hardly free.
When the government forces all plans to cover more procedures and services, the higher cost of providing care compels insurers to raise premiums across the board. Thus, a predominantly male construction firm may end up paying higher premiums in order to cover maternity services for employees who aren’t expecting children anytime soon.
In other words, the essential health benefits mandates deprive small businesses of the option to select less expensive plans tailored to fit their workers’ needs.
Obamacare’s “health insurance tax” also drives up insurance premiums. A 2014 report from the Congressional Budget Office estimated that the tax will extract $145 billion from health insurance companies by 2024. Insurers have simply passed the cost along to individuals and businesses. For small businesses, the tax boosts premiums by an average of $530 per covered family.
For now, though, consumers will have some relief. Congress recently agreed to a one-year delay of the tax until 2017 as part of its recent spending package.
The president’s defenders claim that premiums are rising at a pace lower than, or at least similar to, the pre-Obamacare status quo. From 2010 to 2015, premiums rose 27 percent — the same percentage as the five years before the healthcare overhaul was passed.
But maintaining the status quo is far from the president’s promise to drive premiums down by $2,500.
Worse, this year’s premium hikes are hitting consumers’ pocketbooks harder because wages are largely stagnant. Between 2010 and 2015, workers’ earnings increased about half as much as much as they did between 2005 and 2010.
Nor has Obamacare relieved consumers from the burden of high deductibles. In fact, deductibles for workers with employer-sponsored single coverage have increased 67 percent since 2010. Forty-six percent of all workers with single coverage — and 63 percent of workers at small and mid-sized companies — face a deductible of at least $1,000. That’s up from just 27 percent of all workers — and 46 percent of small and mid-sized firm employees — in 2010.
Of course, higher deductibles aren’t necessarily bad in and of themselves, especially when they’re paired with health savings accounts, which enable people to save money tax-free for future medical expenses. Higher deductibles incentivize consumers to moderate their healthcare consumption and shop around for the most affordable care.
But the theory behind high-deductible plans is that consumers accept higher out-of-pocket costs in exchange for lower premiums. Under Obamacare, consumers are facing high premiums and high deductibles — and limited choice among types of plans.
For many companies, health benefits are proving too expensive to offer — Obamacare’s mandate that most do so notwithstanding. In 2015, 57 percent of firms provided workers with health insurance. That’s down from a high of 69 percent five years ago.
For the 1 in 2 Americans who receive health benefits through an employer, the road ahead doesn’t look promising. Premiums continue to rise. Deductibles are skyrocketing. And companies are in no rush to expand coverage. By any objective measure, the Affordable Care Act has failed to improve the market for employer-sponsored health care.