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Employer Based Health Insurance Threatened By Obamacare

All of us who read the Democratic healthcare legislation and warned that this would result in employers dumping health benefits and forcing us into the Exchanges/Public Option…. well, we were right.  As reported by Fortune Magazine.

The great mystery surrounding the historic health care bill is how the corporations that provide coverage for most Americans — coverage they know and prize — will react to the new law’s radically different regime of subsidies, penalties, and taxes.

Internal documents recently reviewed by Fortune, originally requested by Congress, show what the bill’s critics predicted, and what its champions dreaded: many large companies are examining a course that was heretofore unthinkable, dumping the health care coverage they provide to their workers in exchange for paying penalty fees to the government.

That would dismantle the employer-based system that has reigned since World War II. It would also seem to contradict President Obama’s statements that Americans who like their current plans could keep them. And as we’ll see, it would hugely magnify the projected costs for the bill, which controls deficits only by assuming that America’s employers would remain the backbone of the nation’s health care system.

Obama Lied, Your Healthcare Benefits Died.

Hence, health-care reform risks becoming a victim of unintended consequences. Amazingly, the corporate documents that prove this point became public because of a different set of unintended consequences: they told a story far different than the one the politicians who demanded them expected.

What does it mean for health care reform if the employer-sponsored regime collapses? By Fortune’s reckoning, each person who’s dropped would cost the government an average of around $2,100 after deducting the extra taxes collected on their additional pay. So if 50% of people covered by company plans get dumped, federal health care costs will rise by $160 billion a year in 2016, in addition to the $93 billion in subsidies already forecast by the CBO. Of course, as we’ve seen throughout the health care reform process, it’s impossible to know for certain what the unintended consequences of these actions will be.

Welcome to the Brave New World of Total Government Control.

-Bruce (GayPatriot)

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19 Comments

  1. I actually think this is a great thing. One of the biggest single problems with health insurance is that so many folks get if through their jobs and they are totally disconnected from the real cost of the premiums. Once these folks are out on their own, they will have to pay attention to what they are paying for and what they are getting for coverage. This may be an unintended consequence that in the end will be beneficial.

    Comment by Hunter — May 7, 2010 @ 11:50 am - May 7, 2010

  2. And lots of small businesses (25 or fewer employees) that currently offer employer-paid health insurance will probably drop their plans since they don’t have to pay any penalty…and the projected costs for small business health-coverage is expected to skyrocket.

    In the United States there are nearly 27 million small businesses. Small business for this purpose is usually defined as a business with under 500 employees. However, of those small businesses, over 20 million are solo players. Many of them will be forced to join the exchanges since the private insurance market will dry-up.

    Here in NJ, it’s near-impossible for a sole-practitioner or sole-proprietor to get health insurance unless he was able to convert a former employer-paid coverage plan under COBRA to Blue Cross/Blue Shield…and it’s frightfully-expensive. Most trade groups and professinal associations have droppped their group-plans for their memberships as the overhead expenses grew and the threat of additional finaincial liabilities grew in the 1990’s. I suspect that many who are counted as “insured” actually are covered through a spouses’ coverage. At one firm I worked-for for years, out of the 10 core-members of the firm, I was the only one not covered by a spouse’s employer-paid coverage….so we had no plan of our own since it made no sense to have one just to cover one junior employee.

    Of the remaining 5.9 million, the vast majority have under 20 employees. That’s still millions of employees who’s employer has no mandate to provide insurance, nor a penalty for not doing-so…and to the business it will be cheaper to let employees buy from the exchanges, many using the government’s subsidy, increasing the number of people on the subsidy plan.

    It’s also going to creat a new abritrary barrier for company growth, and create new abuses in the use of part-timers, “independent contractors” and consultants.

    Comment by Ted B. (Charging Rhino) — May 7, 2010 @ 12:01 pm - May 7, 2010

  3. But…but…I thought that after 1,064,531 different experiments that resulted in humans doing exactly what they were incentivised to do, experiement number 1,064,532 would FINALLY yield a result where humans chose to do the EXACT OPPOSITE. What happened?! I don’t understand. How many times are we going to have to do this to get people to do what we’ve told them is the RIGHT thing to do? What does it say about our society when given a choice between doing what’s RIGHT and cutting costs to increase profits, American corporations choose to increase their profits? Shameless. There is seriously no limit to the depths of depravity that these greedy corporations will sink to.

    Comment by Sean A — May 7, 2010 @ 12:03 pm - May 7, 2010

  4. Well this might not have been the intended consequence but it might have lead to something Liberal Democrats wanted. They can rally, or try, people who are kicked off their insurance and point that a public option is the only way to keep health insurance. If companies do really begin dumping health plans, there won’t be a lot of places for people to turn and it might make it easier to push a public option at that point.

    Thats more conspiratorial than I like to be but its not an impossible line of thought.

    Comment by darkeyedresolve — May 7, 2010 @ 12:17 pm - May 7, 2010

  5. So, these companies can cut costs, offer raises, increase shareholder value and eliminate a whole class of regulations by dropping coverage.

    I’m surprised with all the business acumen in Congress, no one saw this coming.

    Comment by BigJ — May 7, 2010 @ 1:07 pm - May 7, 2010

  6. It would also seem to contradict President Obama’s statements that Americans who like their current plans could keep them.

    The Democrats were warned and either should have known, or more likely fully did know, what the bill would do.

    In other words they were either negligent and incompetent, or more likely they just told a pack of bald-faced lies to the American people.

    I think it is more likely that they lied, because we all know what they really want: single payer. Socialized medicine. Government takeover of this 1/6th of our economy. And in bringing that about, job #1 is to wreck the existing employer-based system. Which their bill will do. I think they intended it.

    Comment by ILoveCapitalism — May 7, 2010 @ 1:32 pm - May 7, 2010

  7. The bill was crafted to do this, no doubts. Heck, I even predicted before I knew what was in it. Once I read the low penalties, I knew the employer paid model was doomed.

    Comment by TnnsNE1 — May 7, 2010 @ 1:43 pm - May 7, 2010

  8. Obamacare is going to be the greatest unintended consequences screw-up by the Federal Government since the 18th Amendment. And probably more damaging to the fabric of America society as the costs mount and mount and social-pressures erupt between those requiring health care at any price, and those opposed to and/or tired of paying for it.

    Welcome to a future of both crushing confiscatory taxes, and death panels.

    Comment by Ted B. (Charging Rhino) — May 7, 2010 @ 1:50 pm - May 7, 2010

  9. And another assault on the employer based, private insurer model :

    http://www.forbes.com/2010/05/06/health-reform-business-healthcare-obamacare-wellpoint-cigna_2.html

    Comment by TnnsNE1 — May 7, 2010 @ 1:50 pm - May 7, 2010

  10. The consequences of Obamacare are not unintentional at all, but in fact very intentional. Mr Obama was correct — Americans who like their current plan may keep it. Unless of course the plan no longer exists because your employer ended it to dump you into the public exchange. Well, he never said that wouldn’t happen, would he??

    Comment by Guy — May 7, 2010 @ 3:33 pm - May 7, 2010

  11. I do agree with Guy that these aren’t really unintended consequences. My thinking is that the entire bill was designed so that the system it creates implodes a few years after implementation and at that point Congress will say that the “free market” has failed and the only way forward is single payer. The sheeple will go along with that because any form of affordable private insurance will have been destroyed in the interim.

    Comment by Hunter — May 7, 2010 @ 4:44 pm - May 7, 2010

  12. Obama said for years that he was a single-payer advocate and that HIS plan was the groundwork for that ultimate goal…

    http://www.youtube.com/watch?v=p-bY92mcOdk

    Too bad America isn’t paying attention to Greece, Spain and the collapse of Euro-socialism upon which our “new” (read: tried-an-failed socialist) approach is based.

    Comment by Eloquorius — May 7, 2010 @ 4:50 pm - May 7, 2010

  13. the entire bill was designed so that the system it creates implodes a few years after implementation and at that point Congress will say that the “free market” has failed and the only way forward is single payer.

    Ding! Ding! Ding! Ding!

    These are the INTENDED consequences! Is anyone really in doubt of that???

    As Democrat Jan Shakowsky admitted to her union thug audience on video, “THIS IS NOT A PRINCIPLED FIGHT!” she shouted, this is about getting single payer.

    Democrats continue to make the health care system worse by adding more and more people to the government rolls, including now people who make more than enough to pay for their own health insurance, and the health care sector is just trying to survive by making the diminishing private market pay for the losses they are forced to take by the government. Then Democrats point to the increasing costs that THEY caused as reason to seize control of more of the industry. The more they seize control, the more providers leave the field. The fewer people go into medicine.

    The only thing Democrats know how to do is steal and destroy.

    Comment by American Elephant — May 7, 2010 @ 5:06 pm - May 7, 2010

  14. In other words they were either negligent and incompetent, or more likely they just told a pack of bald-faced lies to the American people.

    You give too much credit. Many on the right told us what was in the bill and that it was going to cost ass loads. The liberal left insisted that THAT was a pack of lies, but they wouldn’t tell anybody what was really in it.

    Ergo, the libs were full of shit and they knew it.

    Comment by ThatGayConservative — May 7, 2010 @ 5:18 pm - May 7, 2010

  15. It’s actually good to stop the antiquated WWII notion of employer-based health insurance, which only causes higher prices and preexisting conditions.

    But employer-based health insurance is vastly better than government-run health insurance.

    This is like Obama saying, “The deficit under Bush is bad, and it must be changed. … I’m going to change it by tripling it.”

    Comment by Mitchell — May 8, 2010 @ 8:30 am - May 8, 2010

  16. Employer-based health insurance was already threatened. As the cost kept increasing in double digits every year, it was only a matter of time before employers just stopped paying for it. Of course, one could ask why employers are asked to provide and manage health care plans. (Even if they don’t pay for any part of the premiums they still pay people to manage the plans offered.)

    Comment by Houndentenor — May 10, 2010 @ 6:43 pm - May 10, 2010

  17. Houndentenor,

    in large part, because it’s in the companies interests to do so. Both to keep their workforce heathy, and as an incentive to employment. If company A offers insurance, and Company B doesn’t, and everything else is equal, guess where most people will go?

    With the new plan though, there’s no incentive for employers to offer insuance. If Company A offers insurance, and Company B doesn’t, but offers the exchanges, Company B has saved a boat load of money, and can still attract the same employees company A has, since Company A’s carrot of insurance has been negated by the government.

    So why should Company A take the headache?

    (Disclaimer: I work for an insurance company, I sure as hell don’t speak for them.)

    Comment by The_Livewire — May 11, 2010 @ 7:16 am - May 11, 2010

  18. […] we had the report of the Medicare Actuary, then we learned that companies might start “dumping the health care coverage they provide to their workers in exchange for paying penalty fees t…”  Guess we could say we told you […]

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  19. […] human nature and economics were proven absolutely and conclusively wrong.  (Info and examples are here, here and […]

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