Before the Patient Protection and Affordable Care Act was signed into law by President Barack Obama, the Congressional Budget Office estimated that 7% of employers would stop offering health insurance to their employees. A new survey by the consulting group McKinsey found a starkly different answer.
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| Photo: Jacob Windham |
January 1st 2014 is when the majority of the act goes into effect. The act expands Medicaid eligibility to 133% of the poverty line and subsidizes health insurance to 400% of the poverty line. Tax credits are given to small businesses under 25 employees, and $2,000 penalties (per employee) are given to businesses over 50 employees for not insuring their workers. Health insurance exchanges and other changes are introduced at that time as well.
McKinsey found that 30% of employers were likely to stop offering health insurance as part of their compensation package for their workers. Among employers that had a high awareness of the reform, that number jumped to 50%. McKinsey also surveyed employees to find that 85% of employees would stay at their job even if they lost their health insurance, although 60% of them expected increased compensation. They also found that 30% of employers would gain economically if they eliminated their insurance even if they increased wages the same amount.
The gaming of Obamacare has not even begun yet, but it seems clear from this study that it will lead to a period of profound transformation. Employer expectations of imminent change coupled with the likelihood of increased worker turnover and overall employment market volatility make it possible that employers have had an increased and increasing reluctance to hire until the rules take effect in 2014. If this is true, it is not helped by the fact that the law may be thrown out by the Supreme Court before then. Lower courts already have conflicting rulings, which virtually guarantees the Court's attention.
If it does stand, it is possible that the Affordable Care Act may actually lead to lower total compensation for U.S. workers. If the the employment situation hasn't recovered to pre-recession levels, employers may use it as a method of fighting the wage-price stickiness issue. This will have to be one of worst unintended consequences in the history of Congress, if it does happen.
