In the News: Blog

Small companies are increasingly dropping the idea of providing their employees with health insurance, the Wall Street Journal reports, and assuming that workers instead will be fine if they’re dumped onto Obamacare’s government-run “exchanges.”

I told you long ago that this would happen: Employers will see the chance to save money and make their workers eligible for government subsidies. They will act accordingly.

Insurers who sell coverage to small companies are now noticing the trend, the paper reports. They’re seeing faster declines in that line of business than they had expected. The Wall Street Journal explains employers’ thinking:

“Blake Meaux, owner of Mo’ Muscle Cars in Conroe, Texas, said his 13-employee company ended its health plan in July after being told its premiums could double or rise even higher.

“ ‘The company could not afford it, and the employees couldn’t afford it,’ Mr. Meaux said. He talked over the issue with workers and brought in an agent to connect them with individual coverage. He is offering to pay about half the cost of workers’ individual premiums, the same share paid under the group plan. . . .

“The law includes subsidies for lower-income workers that can sometimes be as generous as the amounts small employers were paying toward health benefits. Indeed, insurers and brokers say small employers in lower-income industries are far more likely to switch. . . .

“King Par LLC, a golf retailer in Flushing, Mich., decided to end its plan in February as it was facing an expected rate increase. Ryan Coffell, the company’s chief financial officer, said those with relatively low wages, such as warehouse workers, are paying about the same amount toward their coverage as they did before because of the federal support.”

This is precisely the thinking that my experience as a manufacturer – and a buyer of health coverage for employees – led me to expect. As former Congressional Budget Office head Douglas Holtz-Eakin and I explained back in 2011 in the Washington Post, dumping employees onto Obamacare relieves the employer of premiums and makes many employees eligible for a government subsidy. Target Corp. laid out this reasoning explicitly when it dumped employees. Walmart, which formerly offered coverage to all its part-timers, said last month it’s dropping about 30,000 part-time staff off the company’s coverage.

And because early, rosy predictions for Obamacare were premised on fewer employers dumping their workers onto the “exchanges,” it means estimates have consistently underestimated what the program would cost taxpayers. The Obama administration has not been honest about the true coming costs of the program because it has repeatedly said that employers would not do what we now see them doing in greater and greater numbers.

This is why it matters: When employers pay less and employees “are paying about the same amount toward their coverage as they did before because of the federal support,” the money is going to come from somewhere. That would be the federal taxpayer – either now or, because the government continues to spend more than it takes in, from future taxpayers who will be stuck repaying the $17.9 trillion of debt the government already has piled up.

The “Affordable” Care Act doesn’t make health care any more affordable. It just transfers the costs. We are now seeing that happening, and faster than the government was willing to admit.