Critical Condition

Losing Your Coverage under Obamacare

The White House is in apoplexy over a survey released two weeks ago by McKinsey & Company and has done everything it can to discredit the detailed survey of 1,300 employers, which showed a significant percentage of companies will drop health insurance after Obamacare kicks in in 2014.

McKinsey met the criticism with the facts. It released the survey questions, methodology, and data, putting to rest questions about the objectivity. The survey was paid for by McKinsey and not any of its clients; it was administered by an internationally-recognized survey firm; the survey’s descriptions were largely fact-based and generic in nature; and it surveyed a large, representative sample of the nation’s employers.

Obamacare supporters are desperately trying to convince us that employers will be more, not less, likely to offer health insurance under the new health-overhaul law. Case in point: A new study by Urban Institute researchers released on Tuesday which concludes that small employers will be more likely to offer health insurance as a result of the health law.

These conclusions defy evidence, trends, and common sense. Small business owners across the country — and all employers — are considering paying the $2,000 fine for not providing health insurance rather than up to $10,000 for federally-prescribed health insurance for each worker.

The McKinsey survey found that 30 percent of employers overall will definitely or probably stop offering health insurance to their workers. However, among employers with a high awareness of the health-reform law, the share increases to more than 50 percent. I conclude this will mean as many as 78 million workers and their families will lose the health insurance they now get at work. Many of them will be forced into the government-run health-insurance exchanges.

In a study last year, Douglas Holtz-Eakin, a former director of the Congressional Budget Office, estimated that the CBO underestimated the law’s impact on job-based health insurance. He says that the incentives in the law will drive 35 million more workers out of employer plans and into subsidized coverage, and that this would add about $1 trillion to the total cost of the health law over the next decade. McKinsey’s survey implies that the cost to taxpayers could be significantly more.

Other facts to note:

The share of Americans with employer-sponsored insurance dropped from 69 percent in 1999–2000 to 61 percent in 2008–2009. This is part of a larger trend which Obamacare will accelerate.

A PriceWaterhouse Coopers survey of employers found that nearly half of all employers “indicated they were likely to change subsidies for employee medical coverage” thanks to the law.

An Associated Press story from last fall included quotes from a Deloitte consultant saying that “I don’t know if the intent was to find an exit strategy for providing benefits, but the bill as written provides the mechanism” and from the head of the American Benefits Council claiming that the law “could begin to dismantle the employer-based system.”

Former Tennessee Governor Phil Bredesen — a Democrat — in an op-ed said that Tennessee could drop coverage for its state employees, pay the $2,000 per employee penalty to the federal government, give their workers cash raises to compensate for the loss in health benefits, and still come out at least $146 million per year ahead.

Democrats didn’t face the facts about the damage that Obamacare would do before the legislation was passed, and they are refusing to accept the reality of its consequences now.

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