Critical Condition

NRO’s health-care blog.

Obamacare Means Millions Could Lose Coverage


Major companies are beginning to recognize the extraordinary risk of continuing to provide health benefits for their workers under Obamacare.

“Many companies are examining a course that was heretofore unthinkable, dumping the health care coverage they provide to their workers in exchange for paying penalty fees to the government,” according to Fortune  magazine, which reviewed internal company documents.

These company reports are the canary in the coal mine warning politicians, businesses, and consumers of the huge upheaval that will be created by Obamacare. No one can afford this new law, especially taxpayers who will foot a much bigger bill for coverage if companies opt out.

The revelations came as a by-product of House Energy and Commerce chairman Henry Waxman’s ill-fated demand that companies explain why they had embarrassed the administration by announcing big earnings reductions in response to the new law. Waxman was furious at publicly-traded companies for having the audacity to follow SEC rules and report the prospective earnings reductions that would result from losing part of a tax break for providing retiree health benefits.

He demanded documents from four major employers — AT&T, Verizon, Caterpillar and Deere — explaining what the bill would do to their health costs. He got 1,100 pages and quickly cancelled the hearing where the companies were slated to testify. Clearly Democrats did not want the full story to come out.

The new law will require every employer with more than 50 workers to either offer health insurance or pay an annual penalty of $2,000 per full-time worker — a fine that is much cheaper than the price of the ultra-expensive plans that will be required under the law. Even employers who offer health insurance are at risk of penalties if the premiums they charge exceed 9.5% of an employee’s household income (a figure that will be extraordinarily difficult for employers to ascertain).

“AT&T revealed that it spends $2.4 billion a year on coverage for its almost 300,000 active employees, a number that would fall to $600 million if AT&T stopped providing health care coverage and paid the penalty option instead,” Fortune reported.

The potential costs to the companies of the fines, penalties, mandates, and exposure to risk under Obamacare are great, and many other employers will conclude it will be a lot cheaper to pay the fines than to continue to provide health insurance.

The findings send fear into the hearts of working Americans who have been promised over and over that if they like their current coverage, they can keep their insurance. But because neither the White House nor the leaders in Congress seem to understand the power of incentives, they have passed a law that gives companies every incentive to drop coverage.

If this happens, the costs of the health-overhaul law would skyrocket as tens of millions of Americans lose their job-based plans and instead get taxpayer-subsidized coverage in the publicly operated state exchanges or Medicaid. The Congressional Budget Office based its analysis on the assumption that the great majority of people with job-based coverage would keep it under the new law.

The statist solution would be to mandate that businesses provide health insurance for their workers or raise the penalty so it is at least as high as the cost of insurance. But if Republicans take control of one or both houses of Congress this November, that would not happen.

The only real solution will be to repeal Obamacare and take a step-by-step approach to sensible reform that does not radically disrupt the system.


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