Posted by: Doug Henwood | February 19, 2013

Yeah, lots of employers are going to evade health coverage

Back in the summer of 2011, McKinsey released results of a survey they’d done of employers showing that many would not offer health insurance coverage when Obamacare* takes full effect. The liberal establishment united in loud criticism of the consulting firm’s report—but it’s looking like they were right. I wrote up the original report (“Bye-bye employer health insurance”) and experienced some of the loud criticisms, prompting a follow-up (“McKinsey: more right than wrong”) based on reading the full survey, something that some of the critics, including apparently Paul Krugman, hadn’t done.

Ah, vindication. Today’s Financial Times has has a front-page piece (“US business hits out at ‘Obamacare’ costs”) confirming the central point of the McKinsey survey: for many employers, it will be much cheaper to pay the penalties than cover full-time workers, and cut the hours for others so they fall under the definition of full-time and then don’t have to be covered. Retailers and fast-food chains are the most likely to do that, but there’s no reason that many other employers wouldn’t join in.

David Dillon, CEO of Kroger, put it succinctly: “If you look through the economics of the penalty the companies pay versus the cost to provide coverage, the penalty’s too low, or the cost of coverage is too high.” The penalty for not covering a worker is $2,000 a year—less than half the cost of covering a single worker ($4,664, according to the Kaiser Family Foundation), and less than a fifth the cost of covering a family ($11,429). Uncovered employees will be forced to buy coverage on the new insurance exchanges—with a government subsidy if their income is low enough—or pay the penalty themselves. You don’t need an MBA to figure out the math on that one.

As I said in my first post on the McKinsey survey: “In the short term, this could provoke a real social emergency, as scores of millions are thrown onto the private individual insurance market and forced to pay $1,000 a month for crappy coverage. But this could vastly increase the constituency for a single-payer scheme, such as Medicare for All—assuming our rulers don’t destroy Medicare first.” Still true.

__________

*Usage note: Liberals hate the term “Obamacare,” given its prominence in the right-wing playbook. But he’s the one responsible for this monstrosity. Obamacare. Obamacare. Obamacare.

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Responses

  1. Sometimes it sucks to be right, huh? And good luck now reviving a movement for single payer. Thanks Obama.

  2. Haven’t read the background posts, but this argument seems to presume that employers are compelled to cover now, but they aren’t. They do so voluntarily. So why should they renege on that commitment?

  3. Health care has always been considered a part of the negotiated salary/benefits of any job, so it’s hard to imagine companies cutting compensation like this without some concern for losing employees.

  4. This is just greedy fucks shooting themselves in the foot. I cannot wait until we can say bye-bye to employer lead health insurance. That’ll create the space we need for a true public option. Then employees wont be so afraid to tell their employers to suck deeply from their collective assholes. This’ll allows us even greater space to begin rebuilding the hurting Union movement and who knows maybe one day, over throw Capitalism. One can hope.

  5. Good. I hope it’s true. As a hater of the president, and this legislation, I root for failure, in to hasten real change, some day, in this country.

  6. The phrase “fall under the definition” has a common meaning opposite to what you intend here.

  7. They are working on destroying Medicare already. They loudly proclaim their intent.

  8. Because now there will be a (supposedly) viable alternative where there was none before. But large employers will still use the issue to their advantage, and to the disadvantage of smaller employers.

  9. As to the title “Yeah, lots of employers are going to evade health coverage”…they already do.

    I was following along until the credibility was rattled a bit with the characterization “crappy insurance” from the new marketplaces. Actually the insurance has to meet a benchmark of “essential benefits.” This requirement eliminates the sale of “junk insurance” as it is known.

    Another thought. American workers work full time to qualify for benefits. Yet some industries have found ways to circumvent that bargain. And now those same industries are figuring out that they’ll pay a penalty instead of finding ways to give workers insurance.

    OK. But their uninsured, low-wage workers were already using emergency rooms, and the taxpayers were footing the bill via the uncompensated care payments to hospitals from the federal government. At least now there is a penalty for not fulfilling the tacit promise of insurance for full time work for very large companies only. Small businesses are exempt.

    Small businesses (under 100) will be able to get the buying clout of large corporations by buying group coverage on the small business exchanges. And the premiums they pay will be deductible.

    Not seeing the doomsday scenario. And for the sake of discussion, if an inordinate number of businesses just drop insurance, they will be making a bold statement to get insurance off their backs. Looks like such action could possibly be a big push toward single-payer.

    Thank you.

  10. Yay! We’re breaking the back of employer-based healthcare, which is a bad model in so many ways. About time! Currently, employers buy in for the group discount and employees can get insured no questions asked, but it’s a bad deal for employees who actually get sick and can’t work, lose their jobs and have to go on COBRA for eight months at twice the cost. (Oh, and BTW, I’m a liberal and I like the term “Obamacare” just fine.

  11. I guess what I’d want to know is how much will the penalties be for individuals? Pay $12,000 a year for crappy coverage… or $2000 for penalty? My understanding is that there will still be high deductibles and co-pays so I’ll still be paying for stuff. The $2k plus my own doctor bills seems like a better bet. Of course, with something catastrophic I’m f***ed but even with health coverage I’d probably be f***ed. The problem is the insurance companies, pharma, etc., all just have too much profit, too much hot money sloshing around looking for politicians to buy.

  12. The cost of medical care has risen at a rate 51x that of wages in the past 50 years. We need to throw every single insurance company out on their keisters and go to a single-payer universal system like most of the civilized world has. Only by removing corporate greed from the equation will health care ever be affordable for any but the exceedingly wealthy.

  13. don’t forget the penalty you will pay if your insurance is too good – ‘too good’ meaning inadequate as opposed to bad

  14. [...] wielded punitively against the population, and, as acclaimed journalist and radio host Doug Henwood points out, “Obamacare” will presumably result in a situation in which “scores of millions are thrown [...]

  15. [...] punitively against the population, and, as acclaimed journalist and radio host Doug Henwood points out, “Obamacare” will presumably result in a situation in which “scores of millions [...]

  16. […] punitively against the population, and, as acclaimed journalist and radio host Doug Henwood points out, “Obamacare” will presumably result in a situation in which “scores of millions are thrown […]


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