• The Heritage Network
    • Resize:
    • A
    • A
    • A
  • Donate
  • HHS Official Acknowledges Incentives for Employers to Dump Coverage Under Obamacare

    One major concern of Obamacare is its huge incentive for businesses to dump employer-sponsored coverage. Recently, the Obama Administration acknowledged that this is likely, though it did so in an attempt to portray it as a positive outcome of its signature legislation. In reality, Americans will experience severe consequences if this effect of the new law comes to fruition.

    Under Obamacare, those without government-qualified employer-sponsored insurance will be able to purchase insurance in the new exchanges. The new law creates generous subsidies to make coverage more affordable for low- and middle-income Americans. To qualify for a subsidy, an individual or family must fall between 138 and 400 percent of the federal poverty level.

    As health policy expert James Capretta points out, this provision alone would mean that more than 100 million Americans could qualify for subsidies. This would be unaffordable for federal taxpayers and would explode federal deficit spending. So qualifying for subsidies also carries the requirement that an individual or family must not have employer-sponsored insurance, or if they do, it must be unaffordable—as determined by the authors of Obamacare. To discourage employers from dropping existing coverage, Obamacare creates a penalty for employers that fail to offer “minimal essential coverage,” again defined by Washington.

    According to the Congressional Budget Office (CBO), only 19 million Americans would receive subsidies in the exchanges. But analysis by former CBO director Douglas Holtz-Eakin shows that, in fact, this number could be as high as 35 million as a result of perverse incentives in the new law for employers to dump coverage. For many businesses—especially those that employ mostly low-income workers—it would be possible to drop coverage, pay the employer penalty, reimburse workers for the value of their lost health benefit, and actually come out ahead.

    Joel Ario, an official at the Department of Health and Human Services, reinforced this possibility, saying, “If it plays out the exchanges work pretty well, then the employer can say ‘This is a great thing. I can now dump my people into the exchange and it would be good for them, good for me.’”

    Those outside the beltway know that there’s no such thing as a free lunch. As employers drop health plans for their employees, taxpayers will be left to pick up the tremendous cost of offering more and more subsidized coverage in the exchanges. This will drive up the cost of Obamacare and its already-huge impact on deficit spending. Since the subsidies represent a new entitlement program, the only way to control the cost would be to pass legislation reducing benefits or eligibility.

    Though lawmakers struggle to find solutions to rein in unsustainable spending on existing entitlements, Obamacare creates yet another one that is likely to be just as unaffordable. As employers react to favorable incentives to dump employee coverage, the threat to the nation’s long-term fiscal health will only increase.

    Posted in Obamacare [slideshow_deploy]

    9 Responses to HHS Official Acknowledges Incentives for Employers to Dump Coverage Under Obamacare

    1. Bobbie says:

      So no matter what, government is behind it? NO! The people made it clear, this is NOT THE REFORM we were told it would be! We DON'T TRUST GOVERNMENT APPROVAL! Stop the funding and stop this waste of time, money and effort!


    2. Pingback: HHS Official Acknowledges Incentives for Employers to Dump Coverage Under Obamacare | Big Propaganda

    3. Rachael, Pittsburgh says:

      I can get free healthcare in 2014, but it's probably going to be paid for 100 years down the road by my great-grandchildren who will suffer the largest burden of this. No wonder the democrats are still pushing to convince us this horrible bill is so great… the true effects and immense deficits it creates won't be felt until they are all dead and gone.

      The employer healthcare offerings are of course going to be gone. Anyone with a 5th grade education could've told you this a year ago. Obama says we can keep our plans if we like them, but not if our employer knows we can all go get healthcare for 'free' and drops our coverage at the first opportunity. Same as people on unemployment. Sure they can go get a job if they wanted to, but why pass up 99 weeks of free money without doing one thing to earn it??

      Full repeal is the only solution. You can't fix stupid.

      • unemployed IT guy says:


        Please do not assume that people can just go get a job. I was a Sr. VP with a large multinational financial company until the economic downturn in 2008. Since then, I have been told that I am either over qualified, or under qualified for everything I apply to do – even work as general labor at Walmart.

    4. Jim Keil, Westbrook, says:

      I can't think of one reason to expect that government could do this better than the private sector. Where is the evidence of excellence in the federal government, other than the military, which is becoming more hot-tied daily by politics?

    5. Jeanne Stotler,Woodb says:

      We are guaranteed under the Constitution certain rights, one isto be able to live a life without interference from the Gov't. I have read Gov. Bradford's book on the forming of the Plymouth colony, that is why they came here. Now we have the three stooges telling us they know when we should cease living, that they, not God should determine when we are to die. This is a sickining plot from a bad movie. Obama and Co. are trying to bring this country to it's knees and ruining Isurance companies is just one step.

    6. Daver (Ft Worth) says:

      We need to see more discussions from both columnists and politicians about actual cost reduction ideas.

      Regardless of who pays–does anyone think tort reform wouldn't lower costs? Texas is talking about a new law that would make losers of frivolous lawsuits pay for the winners court and attorney's fees. Limiting compensations based on less than reasonable negligence to 6-figures or actual costs–not unlimited, cause the rest of us all pay for that. We didn't harm anyone.

      What about the cost of privacy. Does anyone think the millions of forms you are inundated with and need to be filed and maintained for 7 years are done for free? People have a right and expectation of some privacy of their records–but to put the whole burden on the providers is ridiculous and costly for everyone! I've heard of patients intentionally trying to trick providers into violating terms so they can leverage lower fees.

      Does anyone think the pharma costs make sense when a generic can cost 10% of a brand drug? It's all about the 20 year cost recovery dance the companies are forced to sponsor.

      Reduce these costs and everyone's costs go down. When the discussions shift to these paradigms–we can all only win and bills like Obamacare that are nothing more than crony capitalishm will be seen for what they are. Statist control mechanisms.

    7. cathy, maine says:

      I went to a program called Physicians for a National Health Program….pnhp.org…they spelled out all the details and it sounds like a great alternative to Obamacare or doing nothing. check it out and ask your elected representatives to give us this program instead!

    8. Becky, ohio says:

      Peter Orszag has stated that cutting care should not be an option but amassing more evidence on what worked and what didn't, and then integrating that data into a health-care system armed with electronic medical records and software to help doctors make evidence-based decisions instead of wasting money on unnecessary visits. Why are the decision makers not looking into other options like the ones that I found on http://orszag.net ?

    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.