In 2014, 25 million to 30 million Americans who have employer-provided health insurance are likely to lose it thanks to Obamacare’s requirement that all plans cover what Washington deems “essential benefits.” Some employers will consider that unaffordable and drop coverage altogether, when their current, lower cost plans expire over the course of the year. These 25 to 30 million are in addition to 6 million who bought plans in the individual market and had them cancelled by January 1.
The plight of those 6 million made headline news and caused the first cracks in the Democratic Party’s support for the law. The bigger wave of workplace cancellations will force Democrats seeking re-election this fall to defend a law that harms twice as many people as it helps.
That’s right. At least twice as many will lose coverage in 2014 as will gain it.
The Congressional Budget Office projects 16 million will gain coverage through the law’s Medicaid expansion and subsidized exchange plans. That’s a best case scenario, rosier than the enrollment figures we’ve seen so far, but still half the number losing coverage.
There were warnings of this workplace disaster. In 2011, McKinsey & Company, management consultants, cautioned that nearly one third of employers surveyed were considering dropping coverage in response to the law.
Employers who self-insure are not affected by the “essential benefits” requirement, but employers who purchase coverage in the small group market (for about 60 million people altogether) get clobbered.
The one-size fits all requirement adds a whopping $1.79 an hour to the cost of a forty-hour employee, and over $2 an hour in New York and New Jersey, where health plans are more expensive, according to economist James Sherk of the Heritage Foundation. It’s one thing if you’re paying lawyers and accountants, but unaffordable for waiters and receptionists.
Michael Kennedy, who runs two dog grooming salons near Albany, New York said the requirement doubles his insurance cost per employee, eating away at his small profit.
The thirty-one and a half million people most at risk of losing their on-the-job coverage currently get it from employers with fewer than fifty employees. These employers are free to drop coverage, and many will.
Employers with fifty or more full time workers may be in a different spot, because the Affordable Care Act mandates they provide coverage. The law says the mandate “shall” take effect on January 1, 2014. The president delayed it (without legal authority) until January 1, 2015, and it’s likely never to happen. Nevertheless, employers will prepare in case it does.