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Posted by: Doug Henwood | July 13, 2011

McKinsey was mostly right (cont.)

When McKinsey released its survey showing that many employers were likely to drop coverage rather than comply with the mandates of Obamacare, there was a round of criticism from administration apologists saying the consultancy had gotten it all wrong. Even this august blog was hammered for credulously circulating corporate propaganda, or something like that, by reporting the study (Bye-bye employer health insurance) and declaring its findings “more right than wrong.” Paul Krugman, who is often critical of the Obama administration, nonetheless got into the act, criticizing McKinsey using some second-hand sources— thereby making it clear that he hadn’t read the original.

Now comes fresh proof that McKinsey had a point. Under the law, employers with more than 50 workers will be required to offer “affordable” coverage to full time employees or pay a penalty to the IRS. The Wall Street Journal reports today that big firms are already lobbying to weaken the insurance mandate, using arguments that hint at their future strategy to evade the law. What’s full-time? The law says more than 30 hours a week—but over how long a period? Employers want to average out workweeks over a year, so that turnover and seasonality depress the headcount. (Turnover at fast food joints is around 100% a year, so few workers would last long enough to qualify if the probationary period is long enough.) If they can’t get what they want, look for serious growth in the share of the workforce working 29 hours a week.

And also look for this, as a trade association with the remarkable name Employers for Flexibility in Health Care*—with members including Walmart, The Gap, and UPS—wrote in a letter to the IRS: “Failure to allow a full look-back to employers…may lead to employers dropping the coverage because these employees will be eligible for subsidized coverage through the Exchanges. The ultimate result would be increased costs for the federal government.” Which is pretty much what McKinsey predicted would happen.

And what’s affordable coverage? The law says that the workers’ costs—employers only have to pay 60% of the premiums, and can make workers pay the balance—can’t exceed 9.5% of household income. But how can employers know what a worker’s household income is without invading their privacy? (Of course, it’s not an invasion of privacy to make them pee in a jar for a drug test.) All these “uncertainties” are “worrisome for our members,” the National Restaurant Association wrote recently in a letter to the IRS. Look for lots of challenges on “affordability” too, then.

There will be lots more of this to come. Once again, McKinsey: more right than wrong.

_____

*Usage note: the presence of the word “flexibility” in a political context is almost always a tipoff that rich people are looking for a way to screw nonrich people. It’s hard to think of any exceptions to this rule. The letter from Employers for Flexibility uses the word 22 times.

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