Paying The Price
Call me paranoid, but will Obamacare
build a two-tiered system with Cadillac private coverage for
highly skilled, high-demand labor and public coverage for
I’m a card-carrying conservative Republican, though
not of the Tea Party extraction (I rarely buy into conspiracy
theories). But I’m increasingly convinced that the
bottom-line impact of the healthcare reform law is to lead us
into a single-payer system. I’m also convinced that many
of the law’s architects knew this.
Many of my Democratic friends on the Hill, including those
who voted for the legislation, take umbrage at that notion.
They point to many aspects of the new law that seem to fulfill
the promise of “building on a private system.”
They’d be right on many points—there’s no
public option. The exchanges are being established on a
state-by-state basis, and the guy at HHS in charge of
overseeing the exchanges, former Pennsylvania insurance
commissioner Joel Ario, is a great guy—certainly,
he’s no plotting liberal.
Notwithstanding the ongoing legal challenges and efforts in
Congress to roll back aspects of the law, all the evidence
points to an unraveling of the employer-provided group health
insurance marketplace as the law moves toward full
implementation. The individual and employer penalties pale in
comparison to expected premiums, especially as the legislation
does so little to actually constrain costs.
One of the national brokerage members of The Council took a
comprehensive survey of its group health clients, analyzing the
likelihood that they would drop their coverage in favor of
sending employees to state exchanges. One of the central
premises of the legislation is the Congressional Budget
Office’s estimate that about 5 million Americans would
gravitate from employer plans to exchanges. But what
we’re hearing from brokerages is a much harsher reality.
Professional services organizations—populated by
higher-paid workers—are the least likely to bail on their
plans. But manufacturers, retailers, restaurants and similar
small businesses are doing the math. Federal subsidies in the
exchanges will apply up to 400% of the federal poverty line.
Penalties for employers who refuse to offer coverage are
essentially set at $2,000 per head. With all plans required to
offer plans loaded with mandates and no annual or lifetime
limits, $2,000 is a pittance.
Aside from dropping their plans, one escape clause being
considered by many employers is to reshuffle their workforce to
part-time, where no penalty for non-coverage will apply. Is
this what Congress had in mind?
As employers dump their coverage (beyond 2017, states can
allow groups larger than 100 to check out and send workers to
exchanges), adverse selection within the exchanges will
skyrocket, as individuals game the system of guaranteed issue
accompanied by a weak penalty. Obamacare doesn’t even
establish an open enrollment period.
So the plans in exchanges may be private, but they’ll
be deeply subsidized and regulated by the government. If the
Congressional Budget Office is off only a few more million
people, any “deficit control” element of the law
will vanish. The overall federal burden will spiral out of
The law directs the Department of Health and Human Services
to ensure that the “essential health benefits
package” is “equal to the scope of benefits
provided under a typical employer plan.” Of course, there
is no way to define a “typical” plan. The
administration could determine that the most comprehensive
plans, such as those offered by large, unionized industries,
are the most “typical.”
“Then there’s the fact,” notes the
Heritage Foundation, “that the act of mandating benefits
alone will bring advocacy groups out of the woodwork to lobby
for particular items and services, leading to arbitrary and
unnecessary inclusion of certain benefits. Benefit mandates at
the state level have shown this effect.”
The minimum federal benefits will be an all-you can-eat
smorgasbord, or perhaps the better analogy is a Japanese
Nyotaimori (Google that one up!).
The Council for Affordable Health Insurance observed,
“Mandating benefits is like saying to someone in the
market for a new car, if you can’t afford a Cadillac
loaded with options, you have to walk.” Existing
state-mandated benefits include things like acupuncture, hair
prosthesis, massage therapy and other services that are
unnecessary for most patients. Nevertheless, once mandated, all
covered individuals must pay for these.
It’s not a stretch to imagine what happens next. The
feds already pay a huge percentage of the nation’s
healthcare bills: Medicare, Medicaid, Tri-Care, etc. As
double-digit increases in premiums pile up, with an ever-aging
population, Washington will come to understand that it’s
unsustainable. At that point—you got it—in comes
the single-payer system.