Will Employer-Sponsored Health Insurance Survive Obamacare?
Reports from consulting firms dont normally make national news. Then again, most such reports dont predict the downfall of the American health care system.
Earlier this month, the consulting group McKinsey projected that tens of millions of Americans could find themselves without the health coverage they now get through their employers.
McKinsey is only the latest organization to make a mockery of President Obamas solemn promise to Americans that [i]f you like your health care plan, you will be able to keep your health care plan. Period.
Make no mistake: ObamaCare is behind many employers plans to drop their health insurance. At the beginning of the year, McKinsey surveyed more than 1,300 employers from a variety of industries about the effects of the presidents health law. They found that ObamaCare was primed to blow up much of the market for employer-sponsored health insurance.
According to the survey, almost a third of employers say they will definitely or probably put a halt to their health coverage by 2014.
Among employers that know the most about Obamas health law, the number is even higher. More than 60 percent say that they will pursue alternatives to conventional job-based coverage.
McKinsey isnt the first to sound the death knell of employer-sponsored insurance. The Congressional Budget Office Congresss official economic scorekeeper estimated that four million individuals would lose their employer-provided health insurance over the next decade thanks to ObamaCare.
And last year, the Urban Institute, a center-left think tank, released a report saying that droves of employees potentially tens of millions are likely to shift out of employer-provided insurance because of ObamaCare.
With 156 million Americans currently enrolled in employer-sponsored health insurance, according to the Employee Benefit Research Institute, a mass exodus from employer-coverage would represent a sea change in American health care.
Why are so many employers who currently offer health insurance eyeing the exits?
The law makes coverage prohibitively expensive. Indeed, McKinsey says that dropping coverage will make sense for many companies.
McKinsey reports that at least 30 percent of employers would actually see economic gains from ceasing coverage and thats even if they provided employees with higher salaries or additional benefits to compensate for the loss.
As the study explains, ObamaCare imposes several new requirements on employer benefits, including mandates to cover an employees dependents up to age 26 and eliminating caps on annual and lifetime reimbursement limits. Each of these changes will add to the cost of insurance. Plans that offer the most coverage, meanwhile, will be subject to new taxes.
The law attempts to discourage employers from dropping coverage by forcing those who do to pay a penalty. But given ObamaCares expensive new mandates, many will find it cheaper to pay the $2,000 per-employee fine and rid themselves of the burden of providing insurance.
But that burden wont vanish entirely. Instead, it will fall to taxpayers. Most employees who lose their employer-sponsored coverage will be dumped into the new government-run health insurance exchanges created for individuals and small businesses by ObamaCare.
These exchanges will offer taxpayer-funded subsidies to families earning up to 400 percent of the federal poverty line currently almost $90,000 a year for a family of four. More people losing their employer-sponsored insurance means more people in the exchanges, and more people in the exchanges means more subsidies.
These additional subsidies could double the official cost of ObamaCare. Former Congressional Budget Office director Douglas Holtz-Eakin recently projected that 35 million Americans might lose employer coverage as a result of the health law and enter the exchanges. That would add an additional trillion dollars to ObamaCares cost to about $2.5 trillion over 10 years.
But the McKinsey study suggests that Holtz-Eakins estimate is conservative. So the tab for the additional subsidies could be even higher.
Embarrassed by its findings, the White House is attempting to discredit the McKinsey report. But those with money on the line are taking it seriously.
Investment bank Credit Suisse, for instance, released an analysis saying that McKinseys report offers the most convincing evidence weve seen. The estimates may be staggering, the banks memo says, but they are simply an economically rational response by employers to federal health policy. Credit Suisse even declares that this result is exactly what was intended by the laws authors.
If you like your health care plan, you will be able to keep your health care plan? Were about to find out how big a whopper this presidential promise will turn out to be.