Wednesday, June 8, 2011

Why You CAN'T Keep Your Current Coverage

No time to write a post myself on this important topic--especially as Chris Jacobs has already written on it so well.

From today's email:

The Wall Street Journal has coverage today of Monday’s McKinsey study suggesting that more than half of all employers could decide to drop coverage by 2014 – both a news article and an op-ed by Grace-Marie Turner (copied below).  The op-ed notes that if half of all employers dump their employees in Exchanges, that will meanabout 78 million Americans would lose their current plan.  As the news article notes, this potential change by employers is entirely rational: While the health care law does include a modest $2,000 penalty for employers who do not offer “affordable” coverage, as the article notes, “Health-policy experts have questioned whether that is high enough to discourage companies from health coverage.”  Indeed, Credit Suisse in a Monday note to clients reiterated that employers dropping coverage is “exactly what was intended” by the law in the first place.

The White House was quoted in the news article as saying the McKinsey study was “an outlier amid other research suggesting that employers overwhelmingly would keep coverage.”  But in reality, the studies saying that employers will drop coverage continue to mount:

·         PWC survey of employers released just two weeks ago found that nearly half of all employers “indicated they were likely to change subsidies for employee medical coverage” thanks to the law.
·         Former Congressional Budget Office Director Doug Holtz-Eakin’s analysis confirmed that many more firms than originally projected will have a rational economic basis for dropping their plans come 2014 – resulting in up to $1 trillion more in new federal spending on insurance subsidies than official estimates.
·         An Associated Press story from last fall, titled “Employers Looking at Health Insurance Options,” included quotes from a Deloitte consultant saying that “I don’t know if the intent was to find an exit strategy for providing benefits, but the bill as written provides the mechanism” and from the head of the American Benefits Council claiming that the law “could begin to dismantle the employer-based system.”
·         Former Tennessee Governor Phil Bredesen – a Democrat – wrote an op-ed explaining very succinctly why employers will drop their existing coverage options.  Gov. Bredesen noted that Tennessee could drop coverage for its state employees, pay the $2,000 per employee penalty to the federal government, give their workers cash raises to compensate for the loss in health benefits, and STILL come out at least $146 million per year ahead.

Even worse than the prospect of 78 million Americans losing their current health coverage would be the trillions of dollars in new federal spending on the taxpayer-funded insurance subsidies many of these individuals would receive.  At a time when America faces a looming entitlement crisis regarding Medicare and Medicaid, these recent developments illustrate just how significantly worse Obamacare will make our fiscal predicament.

Chris Jacobs
Health Policy Analyst
Republican Policy Committee

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