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Up To One Third Of U.S. Employers To Drop Health Insurance, Thanks To ObamaCare – Wall Street Journal
ObamaCare will lead to a dramatic decline in employer-provided health insurance – with as many as 78 million Americans forced to find other sources of coverage.
This disturbing finding is based on my calculations from a survey by McKinsey & Company. The survey, published this week in the McKinsey Quarterly, found that up to 50% of employers say they will definitely or probably pursue alternatives to their current health-insurance plan in the years after the Patient Protection and Affordable Care Act takes effect in 2014. An estimated 156 million non-elderly Americans get their coverage at work, according to the Employee Benefit Research Institute.
Before the health law passed, the Congressional Budget Office estimated that only nine million to 10 million people, or about 7% of employees who currently get health insurance at work, would switch to government-subsidized insurance. But the McKinsey survey of 1,300 employers across industries, geographies and employer sizes found “that reform will provoke a much greater response” and concludes that the health overhaul law will lead to a “radical restructuring” of job-based health coverage.
Another McKinsey analyst, Alissa Meade, told a meeting of health-insurance executives last November that “something in the range of 80 million to 100 million individuals are going to change coverage categories in the two years” after the insurance mandates take effect in 2014.
Many employees who will need to seek another source of coverage will take advantage of the health-insurance subsidies for families making as much as $88,000 a year. This will drive up the cost of ObamaCare.
In a study last year, Douglas Holtz-Eakin, a former director of the Congressional Budget Office, estimated that an additional 35 million workers would be moved out of employer plans and into subsidized coverage, and that this would add about $1 trillion to the total cost of the president’s health law over the next decade. McKinsey’s survey implies that the cost to taxpayers could be significantly more.
The McKinsey study, “How US health care reform will affect employee benefits,” predicts that employers will either drop coverage altogether, offer defined contributions for insurance, or offer coverage only to certain employees. The study concludes that 30% of employers overall will definitely or probably stop offering health insurance to their workers. However, among employers with a high awareness of the health-reform law, this proportion increases to more than 50%.
The employer incentives to alter or cease coverage under the health-reform law are strong. According to the study, at least 30% of employers would gain economically from dropping coverage, even if they completely compensated employees for the change through other benefit offerings or higher salaries. That’s because they no longer would be tethered to health-insurance costs that consistently rise faster than inflation.
Employers should think twice if they believe the fine for not offering coverage will stay unchanged at $2,000 per worker. “If many companies drop health insurance coverage, the government could increase the employer penalty or raise taxes,” according to the new study, authored by McKinsey consultants Shubham Singhal, Jeris Stueland and Drew Ungerman.
The case for repeal of ObamaCare grows stronger every year. The massive shift of health costs to taxpayers thanks to the disruption of employer-sponsored health insurance will add further to the burgeoning federal budget deficit. Congress can and must develop policies that allow the marketplace to evolve and not be forced into ObamaCare’s regulatory straitjacket.
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