Considering employer-sponsored health insurance, Obamacare and the (possible) ruination of American health care

September 10, 2013

By Matthew E. Milliken
MEMwrites.wordpress.com
Sept. 10, 2013

Last week, I started looking at the case against the Patient Protection and Affordable Care Act as made by the Senate Conservatives Fund. The fund’s website has a fact sheet that offers some tangible reasons to be leery of Obamacare, including poll results showing that 41 percent of business owners put off hiring new workers and 38 percent delayed plans to expand expressly due to the health care reform law.

But not everything in the fact sheet is solid. Let’s start with this short excerpt from page two of the three-page document:

Obamacare will destroy American healthcare. 
• CBO estimated a loss of employer-sponsored coverage for 7 million people.

In February, the Congressional Budget Office released a set of projections for the next decade finding that “In 2022, by CBO and [the Joint Committee on Taxation’s] estimate, 7 million fewer people will have employment-based health insurance as a result of the Affordable Care Act.”

But wait. How exactly does such a decrease constitute the destruction of American health care? One of the reasons many people think health-care reform is necessary is that the private health insurance market has plenty of gaps: A number of employers don’t offer coverage, and many individuals can’t — or, sometimes, simply don’t — purchase insurance on their own.

Another problem with our current system is that people are reluctant to leave or switch jobs because they’re afraid of losing health care coverage. This phenomenon is called job lock. A 2004 study by a Heritage Institute scholar found that “for married women with employer-sponsored insurance, having an alternative source of coverage increases their likelihood of becoming self-employed by 75 percent…” If Obamacare works as planned, the exchanges would free up more married women to launch their own businesses. Isn’t that a good thing?

This 2008 study concluded that a state government children’s health insurance program “presented a new opportunity to switch jobs without losing health insurance” for working parents in “near-poor households.” Shouldn’t the Affordable Care Act exchanges, which are meant to offer health care coverage for individuals and families, help end or reduce job lock?

Sure, 7 million people losing work-based health insurance would be disastrous…if they had no other way to get health care. But if the law works as planned (again — if it works as planned; it may not), many if not all of those 7 million people will be able to get coverage through the infamous Obamacare exchanges.

Now some — perhaps many — of those 7 million people may find themselves paying more than when they got coverage through work. In fact, some may find themselves paying significantly more. But that is not the same as destroying American health care, which is what the Senate Conservatives Fund warn Obamacare is going to do!

The fact sheet’s next bullet point is more alarming: “According to another estimate, as many as 35 million American [sic] could lose their current employer sponsored insurance.” That claim is sourced to this 2010 analysis by the conservative American Action Forum; unfortunately, the document doesn’t seem to explain how its authors arrived at that estimate.

The document does say, however, that as of 2010 “about 163 million workers and their families receive health insurance coverage from their employers.” The impression that the analysis leaves me with is that over the first 10 years of Obamacare, perhaps 21.5 percent of those getting health-care coverage through work will no lose that option.

That definitely has the potential to be a wrenching shift — especially if it happens all at once. But if it happens gradually, then everything I wrote about 7 million Americans losing employer-based health care would seem to apply: First, most if not all of those who need to find coverage should be able to do so using Obamacare exchanges; and second, some or many of those who go to exchanges may find themselves paying more — and maybe even significantly more.

Is that a problem? Yes. And it’s potentially a big one, depending on just how much out-of-pocket cost to Americans changes.

Is that destroying American health care? Again, not as far as I can tell.

What the Senate Conservatives Fund fact sheet doesn’t mention, of course, is that the Affordable Care Act is designed to ensure that all large employers offer health insurance for all full-time employees. (As defined by the law, full-timers are those who work 30 hours a week or more.) This 2012 Government Accountability Office report found that at least some businesses will in fact begin offering health coverage for the first time as a result of Obamacare. One survey indicated that as few as 1 percent of respondents planned to do so; another said that as many as 28 percent will do so. If some employers do in fact add coverage, that would of course at least partially offset the numbers of people who lose work-based coverage.

If the Senate Conservatives Fund is going to blast Obamacare for causing workers to lose health insurance through their employers, isn’t it a bit unfair for the group to overlook the expectation that it will cause at least a few workers to gain insurance from work?

By the by, that same GAO report stated that as of 2010, there were 156 million Americans younger than 65 who received health care through their employers. Its review of 19 surveys of businesses of various sizes found that as many as 20 percent of businesses intended to drop worker coverage in the near term. The high end of that scenario would translate into about 31.2 million Americans losing such coverage, which is close to the American Action Forum’s projection.

But of those 19 surveys, five showed double-digit planned decreases by employers. The other 14 showed that from 2 to 9 percent would cease offering health insurance. (A table summarizing the different surveys is on page 14 of the GAO report.) Which is to say, the worst-case scenario is hardly assured.

Which brings me back to where I started on Saturday. There’s a chance that the Affordable Care Act will work brilliantly. And there’s a chance — a bigger chance, I think — that Obamacare will fail spectacularly.

But on balance, I suspect the law will work. It will be clumsy and imperfect, yes, and some people will end up paying higher health-insurance premiums. But hundreds of thousands — hopefully even millions — of people who couldn’t afford coverage before may be able to do so thanks to some of Obamacare’s changes. And I’ve yet to see convincing evidence that any of the law’s changes will ruin American health care.

There will be plenty more to write about the law, which has yet to be fully implemented. I’m skeptical that the Senate Conservatives Fund and its allies will be able to block the law in any significant way — but we’ll see. And if Obamacare (finally!) goes through, then we’ll get to see how well — if at all — the law works. It should be pretty interesting.

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