Consumer Power Report #436
Since Obamacare’s passage, the debate over its impact on the economy has persisted as a significant political football. The reality is that there are numerous factors impacting the lackluster economic recovery, not just health care costs for companies or the regulatory impact on businesses. But there is little question by this point that Obamacare’s impact on wages and employment has been a negative one, leading to increased part-time jobs and stagnant wages. Yesterday the American Action Forum released a new report on the issue, particularly looking at Obamacare’s impact on small businesses:
The ACA imposes several burdensome regulations that could potentially harm job and wage growth, including the employer mandate and requirements on the generosity of coverage. Under the ACA, employers with 50 or more full-time employees are required to provide health insurance for their workers or pay a fine. In addition, the ACA enforces rules that govern the type of insurance plans they can provide and restricts their options in choosing low-cost coverage. When employers are required to provide health insurance and their low-cost options are limited, costs will naturally rise and companies will be more responsive to changes in insurance premiums. As a result, employees are less insulated from insurance premium growth, and if premiums rise considerably under the ACA, then employers could be more likely to offset those costs by cutting jobs or wages.
So what does the American Action Forum report find?
American Action Forum (AAF) research finds that Affordable Care Act (ACA) regulations are reducing small business (20 to 99 workers) pay by at least $22.6 billion annually. In addition, ACA regulations and rising premiums have reduced employment by more than 350,000 jobs nationwide, with five states losing more than 20,000 jobs.
The relationship between rising premiums and lower pay was already well known in academic literature. Our research simply measured how the ACA has affected the relationship between health insurance premiums, small business wages, and employment. While there was no significant relationship between healthcare premiums and employment before the ACA, since 2010 small businesses have slowly started shedding jobs and reducing wages. We found that, on average, employees who work a full year for a business with 50–99 employees lose $935 annually due to ACA regulations, while employees of businesses with 20–49 employees, on average lose $827.50 annually.
The Federal Reserve has offered complementary data on this front, indicating that employers view Obamacare as the reason behind many of their decisions concerning part-time hours. TPPF’s John Davidson has more:
Federal Reserve Bank surveys last month in New York, Philadelphia, and Dallas asked employers about the effects of the ACA on hiring and employee healthcare costs, and the results show that a vast majority of firms are facing higher health care costs and a significant number are responding by passing along premium hikes to employees, getting rid of full-time workers, or hiring more part-time workers and contractors.
In New York, two separate polls found 80 percent of manufacturers and 74 percent of services firms expect health coverage costs to increase next year, and a lesser but still significant share said they reduced their number of employees because of the ACA (21 percent of manufacturers and 17 percent of service firms). A full 20 percent of respondents in both surveys reported they were cutting full-time workers or increasing the use of part-time workers as a direct response to the health care law.
Same thing in Philadelphia, where more than 15 percent of surveyed firms said their number of full-time workers was lower, more than 16 percent said the number of part-time workers was higher, and more than 28 percent said they were charging customers more–all in response to the ACA.
In Dallas, about 84 percent of manufacturing firms said the ACA increased healthcare costs this year and expect it will do the same next year, while about 90 percent of service firms are bracing for higher costs in 2015. More than a quarter of manufacturers said they now employ fewer workers, more than 16 percent said they hired more part-time workers, more than 17 percent said they outsource more work, and 20 percent said they’re paying employees less. Among service firms, more than 40 percent said the number of workers that are part-time, temporary, contract, or outsourced to other firms has increased.
Politicians in the 2014 cycle seem to be lowering the volume on Obamacare’s impact. But when it comes to Obamacare’s impact on the job market, it seems obvious the impact is moving solidly in one direction: toward fewer full time jobs, more part time jobs, and wage stagnation.
— Benjamin Domenech
IN THIS ISSUE:
More than half of Americans are concerned they’ll find themselves overwhelmed by medical debt or unable to find affordable health insurance, according to Bankrate’s latest Health Insurance Pulse Survey.
The survey found that worry levels were highest among people in their prime earning years, between the ages of 30 and 64. Six in 10 Americans in that age group were worried they wouldn’t have affordable health insurance at some point in their lives – versus 49 percent of those in other age groups.
The survey also found that 60 percent of women were concerned about their future health insurance – versus 50 percent of men.
“When you think about people confronting out-of-pocket maximums at around $7,000 or deductibles of $5,000 for a family, that’s a lot of money,” David Cusano at Georgetown University’s Health Policy Institute told Bankrate. “You throw prescription drug copays into the mix, and I can see where you would be worried.”
U.S. workers with employer health benefits spent an average of $5,884 on insurance coverage for individuals and $16,351 for family coverage last year, according to a recent report by the Kaiser Family Foundation. That represents a 5 percent increase for single people and a 4 percent increase for families over 2012 prices, compared to wage increases of 1.8 percent and inflation of 1.1 percent during the same period.
SOURCE: Beth Braverman, The Fiscal Times
When Congress returns this week, action in both chambers will mostly be a show for the voters back home ahead of the midterm election. In the House, that will include a vote on a bill to allow insurance companies to continue offering any plan that was sold in the group market in 2013.
Noticeably absent from congressional politicking in the next few weeks is the Affordable Care Act’s risk corridor program, which was, as recently as a few months ago, a major Republican criticism of the law. But that doesn’t mean the “insurer bailout” fight is dead. Republicans in both chambers are quietly working to challenge the legality and projected cost of the program. And that could tee up the issue to become a bargaining chip in the budget fights to come at the end of this year, regardless of who wins the Senate.
The Affordable Care Act’s risk corridor program runs from 2014 through 2016, and was established to encourage insurers to take a chance on covering an unknown population — the Americans who would be purchasing insurance on state and federal exchanges. The program collects funds from qualified health plans that bring in more money than they paid for medical claims, and then pays that money to plans with claims that cost more than they brought it from consumers.
But what happens if there isn’t enough money from well-performing insurers to pay all of the insurers that missed the mark? The federal government is on the hook, but where they find the money to pay those insurers is a question being debated throughout Washington. That’s because the law did not give the federal government a clear appropriation to spend money to make up for losses. And Republicans are, of course, very unlikely to give them one.
The first payments are due out in the summer of 2015, and that timing puts them smack in the middle of bills to fund the government for the next fiscal year. The Congressional Budget Office estimates that the government would collect $16 billion from insurers between 2015 and 2017 for the program, but only pay out $8 billion, netting the government $8 billion over the entire three year period.
Federal, state and local governments will spend a total of $1.4 trillion on health care this year, which will account for a record-high 46% of the nation’s total health care tab, according to spending data released by the Centers for Medicare and Medicaid Services.
That’s up from the government’s 39% share just a decade ago, and the share is expected to hit 48% by 2023, as government programs continue to grow faster than the overall health care economy, the report found.
If this trend continues, government will pay for more than half of the nation’s health costs by 2028.
ObamaCare is fueling some of this spending surge. This year, federal spending on health care is expected to climb an eye-opening 14.7%. And its growth rate will exceed that of private spending for at least the next 10 years, the data show.
CMS also expects Medicaid spending to shoot up 18.4% this year, thanks largely to 28 states’ expansion of the Medicaid program under ObamaCare.
New Ideas Needed
To Douglas Holtz-Eakin, former head of the Congressional Budget Office and now president of the American Action Forum, this trend is troubling.
“You are basically saying, we want to put a lot of the health sector’s future innovation in the hands of government programs,” he said, adding that the government doesn’t have a good track record when it comes to innovation.
The 2017 Project designed an alternative to the Affordable Care Act (ACA), titled “A Winning Alternative to Obamacare.” The proposal, referred to in this report as the Alternative, assumes a full repeal of the ACA and replaces it with provisions to be implemented on January 1st, 2016. Key aspects of the proposal include a premium tax credit for health insurance purchased in the commercial non-group market, a cap on the tax-exempt income spent on employer sponsored health insurance, and a subsidized contribution to health savings accounts, among others. This report details the findings of the Center for Health and Economy’s (H&E) Under-65 Microsimulation Model on the proposal’s impact on health insurance premium prices, insurance coverage, provider access, medical productivity, and the federal budget. While our estimates are associated with some degree of uncertainty, the summary of our findings is as follows:
Premium Impact: The Alternative is projected to decrease the cost of less comprehensive health insurance coverage, such as Bronze and catastrophic coverage plans.
Coverage Impact: The Alternative is projected to lead to 6 million fewer insured persons by 2023. Decreased enrollment in Medicaid is the primary reason for reduced coverage.
Provider Access: The Alternative is projected to result in greater patient access to providers. According to the H&E Provider Access Index, access will increase by 18 percent for the insured population by 2023.
Medical Productivity: The Alternative is expected to lead [to] greater productivity than under current law. According to the H&E Medical Productivity Index, productivity is projected to increase by 9 percent by 2023.
Budget Impact: Compared to current law, the insurance coverage provisions of this proposal will decrease the federal deficit by $1.13 trillion over the next ten years.
SOURCE: Center for Health and Economy
Two Planned Parenthood chapters, two United Way organizations, a food bank association and a Catholic hospital system are among 90 nonprofit groups that will receive a total of $60 million to help people sign up for health insurance, the Department of Health and Human Services announced today.
The money will help people in 34 states that rely on the federal government fully or in part for their Affordable Care Act insurance exchanges, where individuals can buy Obamacare policies. States with their own exchanges have separate funding to help consumers get assistance.
On the phone and in person, navigators help people understand the health law’s new benefits, including evaluating health plans for sale on the marketplaces, also known as exchanges. They have to balance explaining what’s offered without expressly telling people which policy to choose.
The second year of the exchanges open enrollment runs from Nov. 15–Feb. 15. In the first year, despite the disastrous rollout last October, more than 8 million people signed up for private insurance. Enrollment in Medicaid, the state-federal insurance program for the poor, grew by more than 7 million.
Many of the organizations that won the latest grants had assisted consumers during the first Obamacare enrollment that ended in March. The total amount awarded nationally is less than the $67 million awarded last year to states using the federal exchange.
Why would Planned Parenthood want to decrease the availability of contraception, and require women to see a doctor in order to get it? That seems awfully paternalistic of them. But according to Planned Parenthood, it’s about the fact that this over-the-counter push just amounts to access to the widest used forms of oral contraception instead of other forms, and that if put into place, it will force women to have to pay for it, just like they do for Advil or Pepcid or Claritin, instead of having their employer paying their insurer and then having the insurer pay for it, as the laws of nature intended.
That makes sense, of course. It’s also certainly a total coincidence that birth control is a major lead generator for Planned Parenthood, to the degree that they can’t afford to lose their existing purpose as a source of prescribed contraception without it hurting their status as an institution. Pages 16 and 17 of this report break out what percentage of Planned Parenthood’s “services” are related to contraception – it’s over a third of their activity, and the breakdown on page 16 shows that it’s overwhelmingly oral contraception (and less than 5 percent of their business is IUDs).
Now you can understand why they wouldn’t want potential customers to be free to go to CVS or Walgreens or Rite Aid instead of heading to Planned Parenthood – providing those and other services is worth a lot of taxpayer money, $540 million in FY 2012 alone. And if you don’t provide those services, you can’t bill the taxpayers for them.
Planned Parenthood’s hypocrisy here is borne out of their interest in survival as an institution, an impetus for rent-seeking over access. The existing and arbitrary government barrier to over-the-counter oral contraception is a major path to how they get customers in the door, and they know it. That’s why they want to keep the government’s ban on over-the-counter birth control intact.
SOURCE: Ben Domenech, The Federalist