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Another Obamacare disaster that hasn’t happened

Another Obamacare disaster that hasn’t happened

Many grim developments -- both real and imagined -- have been blamed on the Affordable Care Act, also known as Obamacare. But the ACA continues to be less disruptive than its toughest critics predicted.

One big concern has been the eventual demise of the employer-based healthcare system, which is how 55% of nonelderly Americans get their coverage. But in its first full year of operation, the ACA has had virtually no affect on this core pillar of the U.S. health system, according to a new study published online by the journal Health Affairs.

In the study, researchers at the Urban Institute analyzed the percentage of companies offering insurance, the percentage of employees accepting it and the ultimate coverage rates during two different time frames: June 2013 and September 2014. Since the ACA went info effect Jan. 1 of this year, that provides before-and-after snapshots.

Here’s a summary of the numbers for nonelderly workers:

Source: Health Affairs, Urban Institute
Source: Health Affairs, Urban Institute

Basically, there were no meaningful changes between 2013 and 2014. “There has not been the decline in offers of employer-sponsored insurance that many have feared,” the study’s authors concluded. There may have been some change, however, in the mix of reasons companies offered insurance and employees accepted it. In fact, the ACA includes some powerful incentives for both individuals and employers to rethink their health-insurance choices.

The individual mandate, which requires people to have health insurance unless they qualify for an exemption, is likely to lead more people who might decline employer-offered insurance (because they don’t want to pay the employee share of premiums) to accept it instead. So that would tend to push coverage rates up. On the other hand, some firms might find it cheaper to cut back on insurance coverage and let workers get it through one of the new exchanges, even if the company would have to pay a penalty under the law. In some cases, the penalty might be cheaper than the coverage, especially for firms with a lot of relatively low-paid workers, such as restaurants or retail chains. That would tend to reduce the percentage of firms offering coverage.

Projections for the fate of employer-based care have been as scattered as an EKG. Standard & Poor’s predicts that by 2025 up to 90% of workers now getting coverage through an employer will end up getting it through a government-run exchange instead, because companies won’t be able to justify the expense as government-backed care becomes more widespread. Ezekiel Emanuel, a prominent doctor who helped devise the ACA, expects the same general outcome.

But employer plans, a feature of the U.S. healthcare system that’s been in place since World War II, may not disappear nearly that quickly. For many companies, effective health coverage is still an important tool needed to draw talented workers, even if coverage is available elsewhere. Healthcare benefits are tax deductible for the companies that provide them, which adds to the incentive to keep offering them. And companies with more than 100 workers will have to pay penalties starting in 2015 if they don’t offer coverage, giving them further reason to continue the status quo. For these reasons, policy research group Rand estimates that employer-provided coverage will end up more popular, not less.

It’s still early to assess the longer-term changes Obamacare might produce. One big provision of the law hasn’t gone into effect yet: A so-called Cadillac tax on the most expensive insurance plans that will force employers to pay more to the government or scale back the most generous insurance plans. There will also be a Supreme Court decision in 2015 in King v. Burwell, which could gut Obamacare if the justices decide subsidies are invalid in the majority of states that don’t run their own exchanges and rely on the federal marketplace instead.

The most disruptive aspect of Obamacare so far has been the cancellation last year of policies for several million people who bought individual coverage (not through an employer) that didn’t meet the minimum coverage requirements that went into effect in 2014. That became a huge political embarrassment for Obama, who said prior to that that anybody who was happy with their insurance could keep it. The flub generated widespread skepticism toward Obamacare that’s still reflected in dismal approval ratings for the program.

The law has had some modest successes, too. The number of uninsured Americans has plummeted, with nearly 7 million people newly insured in 2014 and that number likely to rise to 10.5 million by the end of 2015. The rate of healthcare-cost increases, which have outpaced inflation for decades, are slowing to the lowest level in 25 years, though it’s not clear if that’s being caused by Obamacare or other factors. And for all the controversy Obamacare has generated, more than half of Americans say it has had no effect on them at all. Obama would like to see that go higher still.

Rick Newman’s latest book is Rebounders: How Winners Pivot From Setback To Success. Follow him on Twitter: @rickjnewman.

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