Obamacare Will Insure Fewer People, Reduce Workforce: CBO

The Fiscal Times
Public Opinion on Obamacare Still Unfavorable
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Public Opinion on Obamacare Still Unfavorable

Republicans on Tuesday pounced on a new Congressional Budget Office report that says the Affordable Care Act may encourage more workers to leave the laborforce than previously projected while insuring fewer Americans.

Newly revised CBO projections show that President Obama’s signature health care law may reduce workforce participation by about 2.3 million workers by 2017. That’s compared to the previous estimate of 800,000 fewer workers by 2021.

Related: The Great Obamacare Workforce Exodus

The CBO suggests the reason for the reduction essentially boils down to employees deciding to work less or opting out of the workforce entirely if they can obtain coverage and subsidies under the new health exchanges.

"The estimated reduction stems almost entirely from a net decline in the amount of labor that workers choose to supply, rather than from a net drop in businesses' demand for labor," CBO said.

The CBO estimates that because of Obamacare, the total number of net hours worked will decrease by about 1.5 to 2.0 percent between 2017 and 2025.

In some cases, employers may be reducing their employees' hours to avoid having to pay for health coverage under the new law.

Obamacare’s employer mandate requires businesses that employ 50 or more full-time workers – defined as those who work 30 or more hours a week – to offer health insurance or pay a penalty of $2,000 per worker. Some businesses are skirting the penalty by reducing workers hours.

Businesses have already been changing their hiring practices. A poll by Public Opinion Strategies found some 30 percent of small franchises and 12 percent of other small businesses say they have already cut work hours – or swapped full-time for part-time workers – and said Obamacare was to blame, The Christian Science Monitor reported recently.

Related:  CBO Future Shock: Economy Will Struggle for 7 Years

Though CBO still projects total employment and compensation will increase over the coming decade, “that increase will be smaller than it would have been in the absence of the ACA,” the report said.

CBO also lowered its estimate of the number of people who would sign up for health coverage through the new exchanges this year. Previously it had estimated 7 million people would enroll in 2014, but due to massive problems with the Obamacare websites, it’s now lowered that estimate to 6 million people. So far, the Obama administration says more than 3 million people have signed up for coverage through January, although only 80 percent have actually paid their premiums.

Enrollment should pick up in the next few years, according to the report. CBO estimates that by 2020, the uninsured population will be about 30 million people, down from the current 45 million.

Related: White House Claims It Will Reach Obamacare Goal

The latest estimates on the ACA’s impact come just as Republicans are renewing their war on Obamacare ahead of the 2014 midterm elections. The GOP has already floated several proposals to replace the health care law to appease voters who are unhappy with Obamacare. Now they will likely use the new estimates in their favor.

House Budget Committee Chairman Paul Ryan (R-WI) was quick to comment on the CBO report.

“Washington can’t continue to ignore the problem: trillions of dollars in empty promises. And Obamacare is only making things worse,” Ryan said in a statement. “This costly law is not only pushing government spending to new heights; it is disrupting coverage and leaving millions of Americans worse off. CBO says the law will push 2.3 million people out of the workforce and will insure far fewer people than previously expected.”

The White House, however, argues that the ACA does not force employers to eliminate jobs or reduce hours and points to a line in the report that says there is “no compelling evidence that part-time employment has increased as a result of the ACA.” The White House stresses the point in the report showing that employees, not employers, are the ones choosing to reduce their hours.

Related: GOP Strategy on Obamacare: Repair or Repeal?

“Over the longer run, CBO finds that because of this law, individuals will be empowered to make choices about their own lives and livelihoods, like retiring on time rather than working into their elderly years or choosing to spend more time with their families,” the White House said in a statement.

“At the beginning of this year, we noted that as part of this new day in health care, Americans would no longer be trapped in a job just to provide coverage for their families, and would have the opportunity to pursue their dreams. This CBO report bears that out, and the Republican plan to repeal the ACA would strip those hard-working Americans of that opportunity.”

The CBO also projected that the average price of premiums purchased on the exchanges would be 15 percent less than previously estimated, although deductibles are often higher than existing plans.

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