2010 April 08 Thursday
Less Employer Health Coverage Under ObamaCare

Eugene Steuerle of the Urban Institute and Tax Policy Center says Obama's big health care change will cause a huge reduction in employer-provided health care to government-created insurance exchanges as the major sources of health care insurance for most workers.

We’ve updated earlier estimates of how the various subsidies in the health reform law affect the insurance market for both employers and workers. And the results remain quite dramatic: It appears that the new law will make it beneficial for many employers to drop their insurance coverage. In 2014 and beyond, once federal money is available through the insurance exchanges, switching from employer coverage to the exchanges may benefit both employers and workers in a wide range of income levels.

Of course Barack Obama said the new system wouldn't affect people who get health insurance thru their employer. And of course Barack Obama, who is not telling people what they need to know about health care, lied about how his new system would affect those with employer-provided medical insurance.

Employers and employees will have a financial incentive to end employer-provided health care. That's a revolutionary change.

How will the new law work? A worker whose household cash income is $60,000 in 2016 and who gets no health benefits from her employer would receive a subsidy equal to approximately $9,000. Because the firm provides no health insurance, it must pay a $2,200 penalty, leaving a net gain of about $6,800. By contrast, a worker earning equal compensation who receives employer-provided insurance would receive a subsidy around $3,500 from the exclusion of health benefits from his taxable wages, leaving him more than $3,000 worse off than his counterpart whose employer offers no insurance. This pattern holds until compensation reaches about $84,000, at which point the two subsidies are about the same. Workers earning more than $84,000 do better under the current employer-provided system than they will under the new system.

Many workers earning more than $84k will still lose employer-provided health care since employers will consider the wages of all their employees. An employer with mostly workers earning less than $84k will have strong incentives to drop their current coverage.

What I want to know: If we have to buy medical insurance thru the new system what happens to us under various illness scenarios? Also, will individual policies still be available outside of the exchanges? If so, how will those policies differ aside, perhaps, by price? Anyone know how the rules for those policies differ from various state-level rules for medical policies?

I am increasingly thinking that one should save up for medical problems whose ideal treatments might not be available in the future unless one can pay cash outside of the regulated system. Worsening fiscal conditions for the US government combined with a push for more equal availability of treatments and regulatory restrictions on treatments aimed at cost cutting could combine to make ideal treatments only available in another country and for cash.

Share |      By Randall Parker at 2010 April 08 08:52 PM  Economics Health

Black Death said at April 9, 2010 5:45 AM:

Both the Samuelson and Steuerle articles are worth reading. They point out the lies and fallacies of the Obama plan. One of the most glaring problems that Obama didn't address is the lack of primary care doctors. Getting patients out of the ED and into a doctor's office for routine care may sound good in theory, but if there aren't enough primary care doctors, how will this
make a difference? "Universal coverage" in Massachusetts has led to the highest insurance rates and longest waiting times in the nation. Obama and his lackeys obviously know nothing about the real world of health care, but that's irrelevant. The point is to increase their control and make more people more dependent on the government as we march toward our quasi-socialist wonderland.

Sgt. Joe Friday said at April 9, 2010 6:53 AM:

Here are some consequences I see coming from this:

1. A growth in the size of the "informal" economy. It's ludicrous to think that there will be no public push-back as more and more regulations get piled onto the system. Bartering will become more common, e.g. a plumber offers to install a new toilet at the doctor's house if the doctor will give the plumber's family an equivalent amount of office visits.

2. More and more doctors opting out completely, setting up "concierge" practices that cater to well-heeled patients who are willing to pay cash.

3. High-end clinics opening up in Mexican border towns, complete with the latest equipment and English speaking doctors. What can Obama and Pelosi do about that? Probably nothing, but it won't be for lack of trying.

4. Medical tourism to places like Costa Rica (this is already happening, I believe) for elective procedures and cosmetic surgery.

5. And of course, a massive increase in corruption. To imagine that people are not going to resort to offering bribes to doctors and other health care employees when they run up against regulations they find inconvenient is to not understand human nature. And lots of doctors will go along also, because they will feel their loyalty is to their patients, not Obama. And can you imagine the circus if Obama decides to crack down and make an example of someone? You're going to have the scene of a guy in white coat being taken away to prison in handcuffs because he thought it was more important to give treatment to a patient than follow some dumb law.

CamelCaseRob said at April 9, 2010 8:09 AM:

I disagree that this is about "control". This is about redistribution of wealth. These guys believe that they should have control over how all money is spent that each person has beyond that required for the basic maintenance of life. In that sense only is it about control.

Edward Thwaite said at April 9, 2010 8:44 AM:

"Employers and employees will have a financial incentive to end employer-provided health care. That's a revolutionary change." On Oct. 7, 2008, Senator Obama in answer to a question about health care being a right said, "I think it should be a right for every American." http://www.youtube.com/watch?v=zAR8K2KCiGc The Democrat plan is to reduce employer-provided health to increase voter demand for European-style health care. However, with liberal immigration laws, the USA cannot afford the massive additional financial burden of health care as a fundamental human right. Save up cash and look into medical tourism — this is the prudent plan for the individual.

Black Death said at April 9, 2010 10:29 AM:

In any sort of governmental health care scheme, a parallel free market system always develops for those with an aversion to dying on waiting lists. In the UK, the parallel private system is available to all who have private insurance or who can pay out of their own pockets. Canadians who desire rapid, state-of-the-art treatment come to the US if they can afford it. This is one of my special favorites (from Wiki):

On February 2, 2010, it was reported that {Danny} Williams (Premier of Newfoundland} would travel to Mount Sinai Medical Center in Miami in the United States to have heart surgery. The move raised obvious questions about the quality and availability of health care services and procedures in the health care system of Canada. According to Deputy Premier Kathy Dunderdale, "It was never an option offered to him to have this procedure done in this province." Dunderdale refused to answer how the procedure would be paid for, or whether the procedure could have been scheduled to be performed in another province of Canada. As Deputy Premier, Dunderdale will assume the responsibilities of premier for up to 12 weeks while Williams is out of the country.[48] On February 8, 2010, it was reported that Williams was recovering well from his heart surgery, had left ICU, and that his U.S. doctors were "very pleased with his progress." [1] Despite the more consiliatory tone of associates, Williams himself later said "I did not sign away my right to get the best possible health care for myself when I entered politics" in defending his choice. However, Williams said his decision to go to the U.S. did not reflect any lack of faith in his own province's health care system. "I have the utmost confidence in our own health care system in Newfoundland and Labrador, but we are just over half a million people," he said. He also said, "The Canadian health care system has a great reputation," but also said that "this is a very specialized piece of surgery that had to be done and I went to somebody who's doing this three or four times a day, five, six days a week."

Truth(er) said at April 9, 2010 2:37 PM:

Really? Heart surgery is a "specialized piece of surgery" that is not done routinely in Canadian Hospitals?

sg said at April 9, 2010 3:08 PM:

"I am increasingly thinking that one should save up for medical problems whose ideal treatments might not be available in the future unless one can pay cash outside of the regulated system. "

That is right.

Step one you have to pay for insurance for yourself and everyone else.

Step two you have to go outside the sh-- system and buy medical treatment when you need it.

Randall Parker said at April 9, 2010 5:29 PM:

Sgt. Joe Friday,

Yes, cash-based practices will probably offer the best care in the US - as long as they are not outlawed. I also expect many treatments to first be available elsewhere. China could become the place to go for cutting edge treatments. I am thinking stem cell therapies, organ replacements grown to order, and other future life saving treatments.

So I think one should save like mad. Also, invest some money abroad. Reduce your vulnerability to the future course of American politics.

Charles Martel said at April 11, 2010 1:49 PM:

Employers and employees will have a financial incentive to end employer-provided health care. That's a revolutionary change.

Untying people from their workplace provided coverage was always the goal of healthcare deform. That's the first step. The next step is government-provided insurance. The third step is a government takeover of the entire healthcare system, either directly or via regulation.

Progressives lie. That's why they call themselves progressives. Here's the basic outline:

First step: Pass a more or less innocuous law.
Second step: will be made inevitable by the inherent shortcomings of that law, like employers dropping coverage.
Third Step: will be due to a court order, for example the application of Plyler v. Doe to government insurance.

The health care deform bill will not work. It was designed not to.

REN said at April 16, 2010 11:37 PM:

It is such a shame. It would have been so easy to fix our current system to make it much better. For example, I had insurance where I paid the Doctor, and my insurance company paid me back. Whenever I told the Doctor I was paying cash, they always lowered the cost dramatically. The insurance company always paid me back quickly. Insurance of this type spreads the risk, and has low costs associated with private sector competition. Tort reform could lessen costs associated with frivolous lawsuits. Insurance portability would remove the slavery of being tied to a company.

How about Charity Hospitals? It is American to do Charity, and allows us to be humane and take care of our fellow citizens. If doctors deduct their charitable time, the medical costs go down, and the amount of doctors goes up. Why? If a doctor is in the 50% tax bracked, then every dollar of charity work is 1/2 price of the going market rate. The Government Costs then go down to provide care to the indigent. The supply of Doctors goes up, as they can make a tax free living. Higher supply in turn drives costs down further due to supply and demand. Many doctors would work for free, just because it is charitable.

But, it is clear that our current regime doesn't want to admit that we have millions of illegals amongst us, who would be forced into the Charity Hospitals. Also, our Obama regime is unwilling to admit that people are not equal in ability, and that some should not be able to afford maximum health care. Freedom implies unequal outcomes.

Probably the most pernicious thing about Obamacare is that it inserts itself in between us and our doctors. Obamacare is economically illiterate, and obviously is designed to entrap and transfer wealth.

MlR said at April 17, 2010 9:36 AM:

Sounds like death panels to me.

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