• The Heritage Network
    • Resize:
    • A
    • A
    • A
  • Donate
  • Governor Bredesen Got the Calculations Right

    In yesterday’s Wall Street Journal, Tennessee Governor Philip Bredesen explained how Obamacare has created a situation where the state government and many of its employees will find it mutually advantageous to the get rid of the employer-sponsored insurance program the state currently offers. As we have noted, Bredesen correctly acknowledges that it will be better for all parties if the state of Tennessee pays the fines involved with not offering an insurance program and subsequently dumps many of its employees onto the federally subsidized insurance exchange.

    Here’s how the Governor’s insightful logic works: Beginning in 2014, state exchanges will offer large subsidies to individuals and their families who don’t receive health insurance through their workplace. Former Congressional Budget Office (CBO) Director Douglas Holtz-Eakin and Cameron Smith have brought attention to generosity of these subsidies, noting that “a family earning about $59,000 a year would receive a premium subsidy of about $7,200” beginning in 2014,” whereas “even a family earning about $95,000 would receive a subsidy of almost $3,000.” As Heritage analysts have suggested, employers and employees alike benefit from an employer dropping employer-sponsored health insurance and simply assisting employees in attaining health insurance (with the help of the subsidies) in the exchanges.

    Bredesen’s analysis has started to attract attacks from Obamacare’s advocates. Jonathan Gruber, a professor of economics at MIT, claims that “Tennessee state employees generally make too much money to get big subsidies.” However, nearly a third of all Tennessee state and local employees would qualify for a generous subsidy if they were to purchase insurance through the exchanges (for a family of four, the average subsidy would be over $9,000) and over 9 percent would stand to gain considerably (for a family of four, the average subsidy would be over $11,500) through the subsidy structure. This 9 percent of Tennessee state and local employees is about 40,000 workers, which is exactly how many state workers Governor Bredesen estimated would be better off on the subsidized exchanges.

    In the end, of course, it’s the taxpayer who picks up the check for the perverse incentives set up in Obamacare. The CBO has conservatively estimated that 8–9 percent of companies will drop health insurance, while the total price tag for the subsidies will be about $450 billion of a bill that will total nearly $940 billion over the first 10 years. However, if our analysis holds up, the price tag of the subsidies could easily triple. And at such a high price, nobody wins.

    Alyssa Esquibel is a member of the Young Leaders Program at the Heritage Foundation. For more information on interning at Heritage, please visit: http://www.heritage.org/about/departments/ylp.cfm.

    Posted in Obamacare [slideshow_deploy]

    2 Responses to Governor Bredesen Got the Calculations Right

    1. Kelsey, ID says:

      Wow, what an amazing article by an incredibly intelligent young woman. Someone should give her a raise!

    2. David Bess, Carson C says:

      Governor Bresdesen is abosolutley correct. The number of companies, large and small, that will dump their insurance programs is going to be overwhelming. But from the administration's point of view this is not a bad thing, in fact it is as designed.
      For once the bulk of insurance is thrrough the government exchanges they can adjust the rates, fines and penalties to insure absolute control of the health care system and thus absolute control of the purse strings of each and every americian. Socialism at its best (or worse depending on where you are in the system).
      With a system that has tenticles invading every governmet agency and every aspect of the individuals life it will be easy for the administration to ENFORCE absolutle power over those that they govern. The right of the citizens will totally disappear within a very short period of time. Your children, grandchildren and all future generations will become surfs to the ruling elites.
      America has come along way in showing the world what freedom can accomplish. Are we now going to prove that democracy can't survive?

    Comments are subject to approval and moderation. We remind everyone that The Heritage Foundation promotes a civil society where ideas and debate flourish. Please be respectful of each other and the subjects of any criticism. While we may not always agree on policy, we should all agree that being appropriately informed is everyone's intention visiting this site. Profanity, lewdness, personal attacks, and other forms of incivility will not be tolerated. Please keep your thoughts brief and avoid ALL CAPS. While we respect your first amendment rights, we are obligated to our readers to maintain these standards. Thanks for joining the conversation.

    Big Government Is NOT the Answer

    Your tax dollars are being spent on programs that we really don't need.

    I Agree I Disagree ×

    Get Heritage In Your Inbox — FREE!

    Heritage Foundation e-mails keep you updated on the ongoing policy battles in Washington and around the country.

    ×