The President repeatedly promised that if you liked your health plan, you would be able to keep it. Nothing would change. Fat chance.
In fact, millions of Americans of Americans will lose or be transitioned out of their existing employer based health insurance. The official Actuary at HHS- who doesn’t speak for the Administration- said it would be 14 million. But a new report by former Director of the Congressional Budget Office Douglas Holtz-Eakin predicts it could be as high as 35 million. That kind of disruption comes at a high price: It’ll cost taxpayers nearly $1 trillion more than previously estimated.
Why? Because Obamacare calls for lavish subsidies to help low- and middle-income Americans buy health insurance. Indeed, households earning up to four times the federal poverty level are eligible for subsidies. According to 2008 Census data, some 127 million Americans would qualify. Yet the official CBO analysis of Obamacare estimated only 19 million would get subsidies.
Why did CBO think the other 108 eligibles wouldn’t ask for “free” federal money? Because Congress added a “firewall” provision: You can’t get a subsidy unless you have no employer-sponsored coverage, or your contribution toward employer-based coverage exceeds 9.8 percent of your income.
But this firewall is flimsy. The inducement Obamacare gives employers to keep providing generous health coverage is the threat of slapping them with a $2,000 per employee penalty if they drop coverage.
The new study by Holtz-Eakin, now president of the American Action Forum, and his colleague Cameron Smith demonstrates just how ineffective this penalty will be. It presents the example of an insured low-income worker earning one-third more than the federal poverty level. The employer could drop that worker’s coverage, give him a raise, pay the penalty and still save money. Meanwhile, the worker could pocket the raise and the Obamacare subsidy, buy his own coverage and be none the worse for wear.
As Holtz-Eakin and Smith put it, “There is room for the employer to actually improve the worker’s life by having a small pay raise and the same insurance and still save money.” For a health plan worth $15,921, the employee would get a bonus of $128 to keep the same health plan in the exchange, and the employer would save $9,941, even after paying the penalty.
In theory, everyone “wins”. Sort of. The employer gets to dump expensive federally mandated health coverage, and the employee, who may have liked that coverage, still gets a pay raise. The only big loser is the employer and employee who happens to be a taxpayer. The feds will have to dole out subsidies to even middle class families whose employers drop coverage due to the programs perverse incentives. After crunching the numbers, Holtz-Eakin and Smith concluded that as many as 35 million could lose employer-sponsored coverage, bringing the price tag of the subsidies from a” measly” $450 billion to about $1.4 trillion. Have a nice day.
