At Least 30 Percent of Employers Will Drop Health Benefits in 2014

Posted: Jun 12, 2011 6:32 PM

Remember the promise that "if you like your health care plan, you can keep it"? It's so debunked by now that even Talking Points Memo must acquiesce that it was "never completely true". They are referring to a McKinsey study showing that Obamacare will cause more than 30 percent of employers to drop health care coverage in 2014, forcing millions onto the public dole. Peter Suderman over at Reason provides additional insight:



The incentives built into the legislation are pretty straightforward: Employers who don't offer coverage will have to pay a penalty. But the penalty in many cases will be far less than the cost of coverage. So even with the penalty, they'll be able to shift employees into the subsidized exchanges, save money, and perhaps even give their employees a raise as they do. As Credit Suisse's response says, "While the figures are staggering, they are simply an economically-rational response by employers to federal health policy to shift the U.S. from an employer-purchased to an individually-purchased insurance market."

This isn't a new worry. As year ago, former Bush administration health wonk told me that he thought it was quite likely that CBO's estimates were low by a substantial margin. “Any state that has a huge number of small employers and individual entrepreneurs and small businessess is going to have floods of people into these exchanges,” he said. Capretta later teamed up with former CBO director to estimatethat, over time, it's a safe bet that roughly 35 million people will end up in the exchanges. 

More people in the exchanges, of course, means more taxpayer money spent on middle health insurance subsidies, since most of the workers who hit the exchanges will probably earn less than 400 percent of the poverty line, the limit at which a family can receive subsidies under the law. Depending on how many workers (and from what income levels) jump the ship of employer coverage for the exchanges, Holtz-Eakin estimates that the cost to taxpayers could be an additional trillion dollars over th next decade.