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  • Side Effects: Obamacare Encourages Employers to Drop Coverage for Sick Workers

    Over the course of the campaign, President Obama repeatedly promised: “If you like your current insurance, you can keep your current insurance”—despite any reforms his Administration would implement. This claim is far from true, as Amy B. Monahan and Daniel Schwarcz illustrate in their 2011 study “Will Employers Undermine Health Care Reform by Dumping Sick Employees?” published in the Virginia Law Review. Schwarcz presented the study on Capitol Hill last week.

    Obamacare mandates that employers provide health insurance for their employees or pay a fine. With the increasing cost of health insurance, which Obamacare does nothing to assuage, employers will find it increasingly more expensive to cover employees. That, along with the other incentives in the law, will likely encourage employers to dump coverage or find other ways to avoid additional costs.

    Monahan and Schwarcz discuss one way this will occur. Since high-risk, unhealthy employees are more expensive to cover, they explain that the new health care law will incentivize employers to find ways to avoid insuring these individuals. The new federally imposed exchanges create a way out for employers to avoid covering high-risk workers while also avoiding the penalty by offering a level of coverage that is simply unattractive to those with higher-cost needs. In this way, employers could “game the system” by providing coverage that is attractive to low-risk, healthy employees but not to those with more costly needs.

    As Monahan and Schwarcz write that “employers will, for the first time, have both an incentive and the ability to design their plans to discourage enrollment by high-risk employees. By doing so, employers can benefit themselves and their employees while individual purchasers and the federal government suffer the consequences.”

    As Americans outside the Beltway know, there’s no such thing as a free lunch. Many other individuals will receive coverage through the exchanges, including low-income individuals receiving government subsidies. Although many high-risk employees opting in to the exchanges instead of their employers’ plans won’t be eligible to receive subsidies, with more high-risk people entering the exchange insurance pool, the cost of the insurance within the exchanges will increase. Consequently, costs—in terms of government spending on subsidies as well as premiums for everyone else purchasing insurance through the exchanges—will also increase.

    Thus, Americans will not be able to keep their current coverage, and they will also experience even higher costs than before Obamacare was implemented. The Monahan and Schwarcz study gives us more reason to believe that the original estimates of the health care law likely understated its true cost.

    Posted in Obamacare [slideshow_deploy]

    5 Responses to Side Effects: Obamacare Encourages Employers to Drop Coverage for Sick Workers

    1. Charlie says:

      How did this person become President? Nobody remembers seeing him in College, there's no record of his grades or how he paid for his education, assuming he was there. He moved up the ranks and made into the White House and nobody is really stopping him from doing what he wants. He came with a mission and he's surrounded by liberals who are all to happy to let him accomplish what he wants. The Republicans, like our beloved Speaker of the House just make talking points how they're against Obama and they quickly return to their country club. We the people are in for a different way of life if Obama wins the November election and gets 4 more years. We need to clean house of those liberal Republicans like McCain who has all the answers these days than when he ran for President. What a waste he is, other than a handful, we need to clean the Congress out and that means both parties, starting with the waste of my time Mr. Boehner.

    2. Bobbie says:

      Reads intentional to me! The sick will be easier to peg off once they're on Obamacare. I'm sorry but, why would control beyond our own (government) provoke temptation on the businesses obligated by government authority to insure employees, not to insure them with government favor disguised as a penalty? Making the boss look bad AND putting the sick in a predicament.
      That isn't civil.

      Can someone remind us what the benefits of Obama's health care plan is? Corruption is unruly and dangerous conduct on good people. Please repeal!

    3. marcustullius says:

      Employers need to switch to a P-HRA.
      (Portable-Healthcare Reimbursement Arrangement).

      Employers make defined contributions into employee-owned accounts, eliminates employer hassles
      Other family members or part-time employers may contribute into shared family account, more money to purchase healthcare policy
      Account (policy) belongs to employee, stays with them between jobs, no COBRA
      Employee selects coverage to meet their need (high risk or not), no one-size fits all
      Employees keep left over funds to pay other medical expenses with a VISA healthcare card

      visit Lyfebank.com to see how this works

    4. Bobbie says:

      had a comment on this one yesterday, also!

    5. Bob says:

      All I know is that my health insurance is now just a bit less than my mortgage. Gee thanks.

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