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The administration suddenly announced last night that the requirement that all employers with 50 or more workers offer health insurance has been delayed until 2015.

If an employer with 50 or more workers did not provide health insurance to their full time workers in 2014, they would have been subject to a fine of $2,000 per worker. The employer would have also been subject to a $3,000 fine for each worker that went to the insurance exchanges if the employer package was not affordable.

Why did the administration delay the large employer mandate?

Because many employers have been in the early stages of planning to cut back the hours of workers in order to avoid having to offer insurance to those customarily considered part time, those who work at least the 30 hours per week the law established for defining a full time worker––and they haven’t been bashful in telling their employees why. In addition, there has been growing evidence that some employers were holding back on hiring in order to avoid more of the mandate costs at a time of high unemployment.

While the administration cited employer administration issues with mandate reporting as the reason for the delay, the bottom line is that the Affordable Care Act (“Obamacare”) was looking like it was about to be successfully labeled a job killer and the administration wanted to avoid that.

You also have to wonder if all of the reporting challenges were just with employers or was the administration also having trouble with the complex employer mandate information systems they will ultimately have to build?

However, this is only a one-year delay. It doesn’t take any of the uncertainty off the table for employers––it simply delays things. But the delay does give employers a chance to see just how the overall law will impact the health insurance market before they make any final decisions. It also gives the Obama administration a chance to reconsider many of the new law’s regulations that have rankled employers.

The administration did not delay the many new requirements facing employers who choose to offer health insurance in the small group market––employers with less than 50 workers. They are faced with the essential health benefit requirements as well as the rating reforms––a small group with lots of young people will see their rates increase significantly because of the new 3:1 age compression rules, for example.

While small employers are not required to offer coverage, if they do they come under that large number of new essential health benefit mandates and group rating rules that won’t apply to large employers. These small group requirements are expected to increase the cost of small group coverage by an average of 15%––with wide variation by state and the average age of the group.

While the new health law enabled small groups to benefit from “grandfather” rules by being able to keep their current benefit package, it has been estimated that only about 15% of employers will still be grandfathered come 2014 because of how stringent the administration made those rules.

These small employers are suffering much the same anxiety large employers are suffering over how they will be able to continue offering coverage under the Affordable Care Act. Many of these small employers are now thinking about dropping their coverage.

Small employers don’t have to comply with the new benefit and rate mandates until their coverage renews in 2014. Earlier this year, a number of insurance companies announced that they were willing to change the anniversary date for small group plans until late 2014 in order to give their small group customers more time to comply.

That offer was met by sharp criticism from some supporters of Obamacare, as well as some state insurance regulators, because it smacked of trying to get around the law.

But now the administration, seemingly out of nowhere, has done just that for large employers.

Why not do the same for small employers as well? And while they are at it, use the time to reconsider the impact many of these regulations are likely to have on the number of small employers continuing to offer coverage.

Perhaps the most significant part of this announcement is that we have finally seen a huge crack in the façade the administration has been maintaining over how well implementation has been going and will go.

What’s next?

Robert Laszewski has been a fixture in Washington health policy circles for the better part of three decades. He currently serves as the president of Health Policy and Strategy Associates of Alexandria, Virginia. You can read more of his thoughtful analysis of healthcare industry trends at The Health Policy and Marketplace Blog, where this post first appeared.

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45 Responses for “White House Delays Employer Mandate-But What About Small Employers?”

  1. BobbyG says:

    “Perhaps the most significant part of this announcement is that we have finally seen a huge crack in the façade the administration has been maintaining over how well implementation has been going and will go.”
    __

    They had to take it off the table for the 2014 mid-terms. Which just give the PPACA critics more time to undermine it, though.

  2. Cynthia says:

    But, but I thought this was the law of the land, celebrated and ruled constitutional by the Supreme Court?

    Got to love our White House, again, picking and choosing what laws to enforce and follow. Gee, the Dictator does what he likes, while the Law be damned! Rest assured that the 2014 mid-term elections had NOTHING to do with this unilateral decision (*sarcasm*).

    Talk about double standards — the employer mandate has been delayed, but the individual mandate has not! This is what happens when you have a government that’s dictated by Big Business at the expense of the individual worker and the self-employed, resulting in lots of corporate welfare with lots of red tape, confusion, waits, ineptitude and incompetence. Congress wants its staffers to be exempt from ObamaCare, but we the people are stuck with it. REPEAL it, and repeal it now!

    • BobbyG says:

      IRS Code § 6055. Reporting of health insurance coverage (a) In general
      Every person who provides minimum essential coverage to an individual during a calendar year shall, at such time as the Secretary may prescribe, make a return described in subsection (b).
      __

      “at such time as the Secretary may prescribe”

      The Administration is exercising its lawful discretion, sorry.

  3. Peter1 says:

    So, what about workers in a 50+ company – do they now also get a 1 year extension on the personal mandate?

    • Cynthia says:

      The bottom line is the administration was informed that employers were going to convert even more jobs to part time. So Obama delayed its implementation.
      The working stiffs are getting a royal screwing over this damn law!

  4. Bubba For President says:

    Is this News a Crushing Blow For ObamaCare’s Credibility?

    … The only reward here is for U.S. businesses, which will get another year of potentially full-time employment from their workforce. In return, the U.S. labor force gets another 18 months of uncertainty as to how their employer is going to handle the implementation of Obamacare. Although I noted a study a few months ago that showed only 11% of employers had altered their hiring habits, or planned to cut hours or jobs in anticipation of Obamacare, if any of these employers are big corporations, then we could have a very large problem on our hands.

    Not so fast, individual health insurance buyers…

    If you’ve been jubilantly cheering the delay up until now and are an individual health insurance purchaser, you may not be nearly as excited to find out that the individual mandate will still go into full effect on Jan. 1, 2014.

    A big component to yesterday’s delay announcement has to do with seeing how quickly workers adapt to the new law and sign up for insurance. Admittedly, the penalty for failing to sign up for health insurance for the average worker is going to be pretty low in 2014 (a flat fee of $95 or a percentage of income), but will escalate each year through 2016. There has been talk that individuals may choose to take the penalty since it would be, in some cases, considerably cheaper than purchasing even the least costly health insurance plan on the health exchanges. If a lot of individuals choose to go this route, delaying the employer mandate isn’t going to make much difference to the success of Obamacare.

    • Cynthia says:

      I love how corporations get a reprieve from ObamaCare, but individuals don’t.
      Maybe we need to petition the Supreme Court to rule that people are also in fact, people.

      • Jeff Goldsmith says:

        Corporations ARE people, remember? Just a lot bigger. . .

        Cynthia is right. The individual mandate is much more troublesome politically. And they still haven’t let the contracts to employ and train all the Navigators to help people sign up- with ninety days to go before the Exchanges are supposed to open.

        It will likely be a VERY bumpy Exchange opening. And if it is, as one CMS CTO type said they are trying to avoid- , “a third world experience” – far fewer people will sign up than expected, penalties or no.

        This postponement takes very little off the table for 2014- there are still the big price increases likely for small employers and those in the individual market, and a lot of small employers dropping coverage. This law is an electoral time bomb for the Democrats.

        It would thus be amazing if there were no more delays. One wonders if fear of angering the President has inhibited the free flow of communication about all the linked implementation challenges.

        AND, not that anyone cares, the federal deficit got $10 billion bigger because that’s what the CBO expected Treasury to collect in penalties. . .

        • Uwe Reinhardt says:

          I read somewhere that if individuals do not obey the mandate to be insured, they don’t go to jail. They pay a modest penalty (pardon me, tax), probably just enough to cover the actuarial cost of stiffing the rest of us when they fall ill, get care and can’t pay for it without insurance.

          • Craig "Quack" Vickstrom, M.D. says:

            You mean when they fall ill, and we as a society fail to take care of our brothers and sister, so we instead rob them? Is that what you mean?

        • Cynthia says:

          The Obama administration will re-focus on health care at a later date. They are presently too focused on apprehending Ed Snowden in order to throw him in a cold, dark hole as a deterrent to any would-be whistle-blowers.

          Our liberty’s under attack
          Our freedom is starting to crack
          At tyranny’s rise
          A proud nation dies
          And rights begin fading to black

          The Limerick King

  5. Peter1 says:

    “There has been talk that individuals may choose to take the penalty since it would be, in some cases, considerably cheaper than purchasing even the least costly health insurance plan on the health exchanges.”

    I’m going to claim religious exemption.

    • Uwe Reinhardt says:

      Jeff Goldsmith and I will create a new religion and then claim an exemption, too. Any ides what that should be?

  6. Uwe Reinhardt says:

    I think of this provision as one of the more dubious once in the ACA and am glad it is being postponed. Perhaps a bi-partisan coalition will form to repeal it altogether.

    If employers find it in their interest to sponsor health insurance coverage for their employees — as most larger ones do — fine. If they don’t, let them concentrate on making widgets and let the exchanges take care of their employees, often with subsidies. That is what the exchanges are for: the provision of social health insurance.

    I am puzzled by conservatives who during the 90s wanted to get rid of employment-based insurance in favor of portable individual policies purchased on exchanges, but now lament when business firms dump employees’ coverage onto the exchanges. Is that not what was wanted in the 1990s?

  7. Rob says:

    I think I would rather have large corporations pay for their own workers medical insurance out of corporate profits, even if it means less profit to shareholders, as opposed to having me, the taxpayer subsidize the health insurance premiums of their workers.

    • Uwe Reinhardt says:

      Rob:

      Few economists believe the the employer-paid premiums come out of corporate profits. We are persuaded by theory and empirical evidence that for the most part, and over the longer run, the employer’s cost of sponsoring health insurance is shifted backwards to employees in the form of lower take-home pay.

  8. Rob says:

    Good!!! Perhaps able bodied workers SHOULD pay for their own health insurance(even if it is in the form of lower take home pay) rather than have others subsidize their insurance in the form of higher taxes. I am not an economist, so I will have to take your word for it, but it appears to be a specious argument to claim that by not paying for workers health insurance(or reducing absolute wages) companies would not increase profits by decreasing overhead. A second point that you don’t address is that liberals are constantly clamoring to increase the minimum wage. If the new health care legislation forced corporate giants like Walmart to pay for health insurance of their minimum wage workers, that in fact would be a huge increase in their wages. Lastly, if your argument was truly valid, and paying for health insurance did not diminish corporate profits, why did big business lobby so hard for an exemption, and why did the Obama administration capitulate to their demands?

  9. Bob Hertz says:

    About 96% of businesses with over 50 employees already provide health insurance.

    The 4% who do not provide health insurance now were the target of the mandate. This is about 10,000 businesses with a total of 2 million employees.

    These businesses are (no surprise) concentrated in retail, restaurants, car wash chains, etc.

    Although these businesses are not high in prestige, I have noticed that in every attempt at health reform they are able to defend their cheap-labor business model.

    Why can 4% essentially outvote 96% time and again?

    That will take a longer analysis than I have the time or the skill to complete.

    It could be because America needs these low wage businesses more than it cares to admit. Without them you would have much higher levels of youth unemployment.

    Anyways, Dr Reinhardt is correct that the solution here is social insurance.
    The employees of Walmart still get free public schools and public libraries and police and fire, even with low wages, because we all pay taxes for these public services.

    The only thing I would like to see is for those businesses which do not provide health insurance to pay higher payroll taxes. And not by some obscure 30 hours formula either……just add 2 or 3 per cent to their Medicare tax assessment.

    Bob Hertz, The Health Care Crusade

  10. Rob says:

    I’ll say it again, why would the Obama administration throw the most vulnerable, underrepresented and underpayed workers in America under the bus so to speak, and allow their employers to be exempt from the health care mandate and make the tax payer pay for their health care benefits , and subsidize the profits of just those industries you mentioned? You don’t site any references for your statistics, but even if they are accurate(which is debate able), 2 million workers are a lot of hard working individuals to turn your back onand throw under the bus. If your statistics are accurate, How is it that 4% of businesses are able to so effectively lobby the Obama administration that it would(embarrassingly) back down from its insurance mandate? Why should taxpayers take on the burden of subsidizing the health insurance of these able bodied workers when as you say 96% of all other businesses are able to provide that benefit? Wouldn’t forcing companies with a high percentage of low income or minimum wage employees, realize a large increase in wages if their companies were required to provide health care benefits? The solution is not a hodgepodge of regulations where some companies provide benefits and some do not, nor is the solution for some segments of the population , through either age or economic status get free or subsidized health care benefits while others do not. The solution is a national health care system to benefit everyone equally,and not the few, paid with a fair and equitable tax.

    • Peter1 says:

      Rob, the taxpayer is subsidizing no matter what. Employees are not taxed on the benefit and the business deducts the expense from their tax return.

      Those not covered at work will have to get insurance through the exchanges and whatever taxpayer subsidy they can get to help pay.

      I agree on a national (non-private insurance) system but that will be taxpayer funded as well. That won’t happen until health insurance is no longer profitable for private insurance companies.

  11. evilcyber says:

    Nobody said the process would be without pain, but that doesn’t mean Obamacare wasn’t the right step.

    • Peter1 says:

      The “right step” should include cost controls not just using subsidies to compensate for business as usual health inflation.

      Wait til you see your mandated exchange premium before you think Obamacare is too much pain or not.

  12. Bob Hertz says:

    Rob, I am totally with you on helping low wage workers. Terrible things go on every day in the non-union cheap labor underworld.

    However, I cannot follow your assertion that low wage workers are being thrown under the bus by Obama.

    They did not have employer health insurance before the ACA.

    Under the ACA, a few employers were going to offer mini-med plans, but most were going to send workers to the exchanges and just pay the penalty.

    Now there is no penalty for a year. The workers can still go the exchanges.
    The government will incur more debt I suspect.

    No great change for the workers, though I may have missed something.

    • Rob says:

      Yea, you missed something. Public policy legislation should force all employers to provide health insurance, OR it should go in another direction and provide or subsidize insurance for everyone. I will say this again, why should I as a taxpayer provide a subsidy to the employees of companies that pay low or minimum wage so that those companies can reap higher profits? If the Obama legislation had not given an exemption to companies that in many cases are exploiting their workers, or required a substantial(not trivial)
      penalty for not providing medical insurance, these employees would have realized a substantial increase in absolute income, would have had access to the same tax-exemption(or subsidy) that 96% of other workers already are receiving the benefit of, and the taxpayer would not be on the hook for an additional tax subsidy in the form of insurance exchanges. Obama is effectively giving the most exploitive businesses in America a subsidy that taxpayers have to foot the bill for, in order to protect corporate profits(Uwe Rheinhardt’s opinion notwithstanding)

  13. Bob Hertz says:

    Good ponts, but politically why is it so hard for even a Democrat to go after cheap-labor employers?

    Is it because even many Democrats would rather have low low prices vs. taking care of workers?

    Is it because labor unions are preoccupied with the precarious status of their own members, and ignore unorganized workers? (which has been true for a long time in America?)

    Is it because the low wage employers can scare us with actual or proposed layoffs?

    Is it because very few Americans appreciate how much money is made by large restaurant chains and similar businesses?

    I do not really know the answer.

  14. Barry Carol says:

    While there has been a lot of discussion about companies that offer health insurance to their employees vs. those who don’t, I haven’t seen any good data on how many employees work for firms that offer insurance that falls short of the ACA’s essential benefit mandate including comparatively modest deductibles. I’m sure there are plenty of employers that will have to beef up their coverage at considerable cost which will get reflected in a combination of higher required employee contributions and smaller raises or none at all vs. what would have been provided in the absence of higher health insurance costs. The price of their products and services will presumably also rise to reflect the higher health insurance costs.

    People should also think about the implications of what it would take to bring comprehensive health insurance to the restaurant industry which has millions of low paid workers. For a typical chain restaurant, about one-third of the revenue dollar goes to pay for the actual food and beverages. Another 10%-15% goes for rent and most of the rest is for labor and benefits including tips paid by customers on top of the menu price.

    If you go to an ordinary restaurant in a large Western European city, you will find that a typical meal costs two to three times what it does in the U.S. It’s not uncommon for a burger, fries and a soda to cost $30 or more in the equivalent of a diner. How many fewer restaurants and how many fewer restaurant workers do you think there would be in the U.S. if menu prices suddenly doubled or more? Workers who still have jobs would make considerably more money and would have good health insurance but there would be a lot fewer of them. Everything in life is a tradeoff.

    Finally, as for implementing a health insurance system paid for by taxes, Americans just wouldn’t tolerate the level of taxation needed to do that. It’s as simple as that. Moreover, since prices per medical service, test, procedure and brand name drug are significantly higher in the U.S. than in other developed countries, even a single payer system would not be as effective as advocates suggest in reducing costs. A recent article in the New York Times that described the very high cost of intensive treatments delivered to women who are pregnant not only showed that pregnancies cost far more in the U.S. than elsewhere but that even Medicaid which is notorious for paying very low prices for care pays an average of over $9,000 for a routine pregnancy and delivery compared to about $4,000 in the next most expensive countries. Go figure.

  15. Doctor Mawrdough says:

    How is it that Congress passed a law and the POTUS can alter its implementation?

    That asked, I think you have omitted an essential component of the delay. The POTUS has had an epiphany. The financial projections the White House and Congress used to pay for Obamacare are flawed, because so much of it was to come from the savings from using HIT (and we now know that such is not happening).

    Costs of care and outcomes of care have not improved when HIT is deployed. Sorry to let you know the facts.

    • Tb says:

      Congress does not control implementation of laws. That is left to the executive branch to “execute.” This is not some hidden scandal if that’s the point you’re trying to make.

  16. Bob Hertz says:

    Barry is correct about the downside of higher mandated wages and benefits in the restaurant industry.

    Restaurant prices would go way up, but the middle class customers of those restaurants are not enjoying higher incomes. This is a recipe for higher unemployment.

    It is better to have a job with no health insurance, vs. no job and maybe have Medicaid in some states.

    The solution is to beef up safety net health care, rather than turn over the US labor markets to expand health insurance (and wind up with high deductibles anyways.)

    Also — Barry is the second commentator (after Jeff Goldsmith) to mention that small group health insurance premiums will go up under the ACA.

    If this is true, it was clearly NOT an advertised feature of the ACA.
    I myself have been so caught up in the drama about the over-50 employee mandate that I was not aware this was on the radar.

    I wonder how large the impact will be. Will it be worse than the 10-20% annual increases that small groups have been getting for years?

    • Jeff Goldsmith says:

      A number of the large insurers have told their brokers to expect 30-70% increases for their small group clients, a direct consequence of spreading the cost of highly concentrated risks (lifetime caps on benefits, guaranteed issue and renewal, no pre-existing conditions and, if you have younger workers, the 3:1 rating bands) over the entered small group and non-group pool.
      Who knows what else is in there. . .

      The private health insurance risk pool is really shallow, and roughly a trillion dollars (the size of a developing country). It’s like Lake Superior. And ACA effectively dredged the bottom, stirring up a lot of sediment. There is no actuarial navigation chart through all the little bays and shallows, either. And we’re adding tens of billions in subsidy dollars to it. Moral hazard and risk will not disappear. Rather, its consequences are now political and will be blamed on the carriers.

      If Bob L. is still tracking these comments, it would be a great time for him to chime in. . . .

      • Peter1 says:

        Jeff, if the small group is hiking prices that much it does not give much hope for the individual market. Including everyone in the same risk pool is something I’ve advocated as martket segmentation is not insurance risk pooling – BUT we now see hoe our high prices and private equity in health care is not doing us any favors.

        Where did the, “but you’ll get millions of more customers” argument go when ACA was being sold and promised that this would offset insuring more risk?

  17. Bob Hertz says:

    As far as the ‘millions more customers’ argument, here is what I think is the case:

    the insurance actuaries fear that they will get the bad risks first, and only later will they get the many new good risks to offset the bad ones. The many new good risks are not a sure thing, whereas getting bad risks is almost a sure thing.

    Actuaries are paid to be conservative, so they are raising rates now.

    Also, the public may underestimate how many good risks it takes to offset the bad risks.

    When the federal high risk pool was opened in 2011, the first 100,000 enrollees had an average claim cost of $31,000 apiece.

    Using a pocket calculator, it would take about 1 million perfectly healthy young men to create an inexpensive risk pool with the high risk enrollees.

    That is a very rough estimate but you see the challenge.

  18. Peter1 says:

    “the insurance actuaries fear that they will get the bad risks first, and only later will they get the many new good risks to offset the bad ones.”

    Well the higher the quotes the less likely the healthy ones will buy. Then once the “don’t-need-insurance-now group starts to trickle in when will they get the benefit of a larger pool of like healthys to lower their rates. It’ll have to be people willing to sacrifice themselves for the common good – If that were the case they would not be uninsured in the first place.

    Private insurance is just not going to work.

    • Jeff Goldsmith says:

      Not to quibble, but it isn’t really “insurance” any more if you cannot rate and price the actual risk. We’re off into “social” insurance land with this law, and there are VERY significant transition benefits and costs, depending on what you were paying before, and, crucially, whether you were previously insured or not.

      Overall, we are, as you suggested, better off in larger pools, which should be more stable long term. Unless whoever the “insurer” is can reduce the expense somehow, again as you said earlier, this is going to be a very expensive proposition for taxpayers, who will be compelled, thru subsidies, to make whatever we’re going to call this new health benefit affordable to a large enough group of people.

      This has been a seriously messed up health reform, so far. And to go thru all this and STILL have 30 million uninsured left over at the end of the cycle is really discouraging.

      • Peter1 says:

        Jeff, when can an insurance company ever rate (before ACA) the actual risk? They don’t know what level of risk will call to sign up – more younger, more older. But you know I don’t think it was ever insurance because the insurance companies had the risk market segmented so much there was not much sharing of risk.

  19. Barry Carol says:

    Jeff –

    While I agree with your last comment, I think we would be well served if we put more effort into tackling healthcare costs, especially the price gap vs. other developed countries per medical service, test, and procedure and brand name drugs and devices.

    I’ve long advocated for robust price and quality transparency tools that will enable both patients and referring doctors to more easily identify the most cost-effective high quality providers in real time and direct more of their business to them. Tiered network and narrow network insurance products would also be helpful as would tort reform that gives doctors safe harbor protection from failure to diagnose lawsuits if they follow evidence based guidelines where they exist. I also think reference pricing, which CALPERS is embracing, for specific procedures like MRI and CT scans, colonoscopies and hip and knee replacements is a good step in the right direction. Finally, we need special rules that govern how much can be charged for care that must be delivered under emergency conditions if and when insured patients wind up in an out-of-network hospital. The uninsured should be charged no more than some appropriate percentage above Medicare rates for emergency care.

    Historically, I think large employers have resisted tiered and narrow insurance networks as well as reference pricing because they were afraid that employees wouldn’t like them and/or wouldn’t understand them. The conventional wisdom was that employees wanted a broad provider network and small, simple to understand coinsurance payments and low or at least reasonable deductibles. Employers need to drive home the message that the more they spend for health insurance on their employees’ behalf, the less money there will be for raises, hiring and expansion and, at the end of the day, the employer’s healthcare costs are pushed back to employees in the form of lower salaries than would otherwise prevail.

  20. Bob Hertz says:

    Two points to make, mainly in re: Jeff’s comments:

    a. The small group and nongroup insurance markets have been kind of a dumping ground for the past 50 years.

    First the corporations with younger healthier workforces were pulled away from Blue Cross’s community rating way back in the 1950′s.

    Then the largest corporations began self-funding. This left the small groups and individuals to the insurance companies, which by and large shafted them with many lowball pricing schemes — followed by constant rate increases with the intention of having a lot policy lapses.

    b. The ACA is not social insurance by my definition, Actually I follow Joseph White’s definition of social insurance as guaranteed coverage, paid for with either taxes or premiums that act just like taxes, and with no one excluded or exempted from participation.

    The ACA follows the American habit of thinking that health care can be solved by millions of people making good decisions, and many of the millions getting subsidies to make the good decision easier.

    Social insurance like Medicare makes the funding decision for you.

    The ACA tries to harness private insurers to promote the public good.
    In some ways this was what Bill Clinton and Ira Magaziner tried also.
    I agree with Jeff that if it works we will be lucky,

  21. Bob Hertz says:

    In case anyone is interested, (now isn’t that a way to start a blog post!),
    Iet me go on about the actuarial aspects of the ACA.

    (I used to work for an insurance company, though I am not an enrolled actuary.)

    Anyways, the major determinant in pricing for insurance companies is how many large claims they have to pay for a given group.

    The reason that underwriting was so crucial is that it minimized the number of large claims at least in the first 3-5 years that a person was insured with the company.

    The reason for large premium increases after 3-5 years was that if the group of insureds was fairly stagnant, the number of large claims would start to spiral upwards.

    You saw this with a vengeance in any workplace with seniority and tenure, such as auto companies or school districts.

    It is no accident that the cheapest insurance plans before the ACA excluded maternity, had relatively low lifetime limits, and sometimes outright excluded chemotherapy.

    OK. Fast forward to the ACA.

    Anyone who could read Health Affairs would know that guaranteed issue would lead to higher claims and higher premiums. It happened like clockwork in five or six states over the last 20 years.

    But the ACA was going to mitigate the premium increases by roping in lots of young healthy persons who would on average not file large claims.

    The employer penalties were also designed to get more young people insured, either on the employer’s dime or in the exchanges.

    If I ran the circus, I would have attacked large claims as padded and overpaid. I have an article coming out on that subject.

    However, Obama made a cryptic ‘deal’ with hospitals and drug companies, so that was off the table. He has not been one for confronting corporate power anyways.

    It is true that numerous other nations rely on some form of mandate to make their risk pool a lot “deeper” in Jeff’s terms.

    But these nations have much more regulated labor markets, and shall we say more obedient populations.

    The ACA is kind of rolling the dice on getting young people insured. Zeke Emmanuel more or less admitted that.

    We will see if the Obama administration can steer through this.

  22. Barry Carol says:

    Bob –

    Informative comment.

    If I were a betting person, I would bet that the number of young healthy people will choose to pay the penalty instead of sign up for health insurance for two reasons. First, the penalty is way too low relative to the likely cost of insurance. The second is that they can always sign up for insurance after they get sick or become pregnant because of the guaranteed issue provision in the law.

    Twenty years ago, Washington State had community rating coupled with guaranteed issue and a mandate to purchase insurance. The mandate proved so unpopular that the legislature repealed it but kept community rating and guaranteed issue. One healthy woman six month pregnant and on her way to a normal healthy delivery signed up for insurance. After she had her baby and the bills were paid by the insurer she cancelled the policy and had the audacity to send them a letter thanking them for their coverage and suggesting “I look forward to doing business with you again the next time we are pregnant.” She did exactly that a second time. The bills paid by the insurer for the two deliveries were six times what she paid in premiums. This is classic adverse selection and is typical of what happens under guaranteed issue provisions without a mandate to purchase insurance backed up by a stiff penalty if you don’t. Washington state later allowed insurers to look back nine months for pre-existing conditions and could deny coverage if they found any.

    If the Obama administration really wants young healthy people to sign up for health insurance, the penalty for not buying it needs to be something close to the cost of the least expensive policy. Perhaps 90% of the cost of a bronze level plan might be appropriate. Second, insurers need to be able to look back at least nine months for pre-existing conditions unless you buy insurance as soon as you become eligible for in in January 2014. After that, there should be annual open enrollment periods to sign up which is how Medicare Parts B and D work. If you miss the window, you have wait until the next open enrollment period unless you qualify for an exception like losing employer coverage or aging out of coverage under a parent’s policy or losing coverage under a spouse’s plan. The law as currently written will not work. Period.

    Separately, a senior insurance broker I know confirms Jeff Goldsmith’s comments regarding likely sticker shock in the small group market. This isn’t going to be pretty.

    • Peter1 says:

      “If the Obama administration really wants young healthy people to sign up for health insurance, the penalty for not buying it needs to be something close to the cost of the least expensive policy.”

      Barry, we are being forced to buy into the most expensive coverage on the planet. Only the non-employer insured and taxpayers are being given the shit end of the stick. No one else in the industry is skipping a profit beat.

      I’m probably in the doughnut hole of spouse with employer coverage open to family and not eligible for subsidy, even though there is no bargain in that group. When I was insured I was able to buy for a lot less from BCBS as an individual not in my wife’s group coverage, which was also BCBS.

      I’m not going to be the sacrificial lamb in this mess.

  23. Barry Carol says:

    First sentence should read the majority of young healthy people will choose to pay the penalty.

  24. Bob Hertz says:

    I spent a little time on the excellent Kaiser subsidy calculator website.

    A male age 30 making $30,000 has to spend $2500 a year for a silver plan with a $2,050 deductible. That is after his subsidy.

    $200 bucks a month is a lot when you are making $30,000 a year pre-tax.
    Paying the penalty is going to look pretty good.

    Incidentally, the situation for families is better. A man and wife with 2 kids and total income of $50,000 will pay about $300 a month out of pocket for insurance after the subsidies are factored in.

  25. Bob, I looked at that calculator as well (great find), but for the family of 4 while the cost seems lower you have to factor in the overall cost of a family against that 50K of income (anyone with kids knows they are expensive). This also assumes that they qualify for the full subsidy and also that nothing happens during the year where income is reduced etc. The change in income problem is an issue that we are starting to read more about how that is going to be handled as well. Seems like most folks believe that the IRS will catch up to you somehow, but I think that this is quite unclear yet as to actually how that can be acheived.

    Additionally, this scenario assumes that the coverage is available for the family in their state as well (see Mississippi) or that the available plans have a network in the area where they live (I believe Montana has gaps due to Insurers not joining the exchange year 1).

    Lots of potential pitfalls to Obamacare, and these types of issues are going to be problematic as well as the overall technical issues that the Fed and State governments are facing just trying to get the exchanges live (I work in insurance tech, its going to be a mess when they try and roll this out). I think the concept of Obamacare is ok, just don’t think the approach was particularly well thought out nor was the actual problem of Health Care in the US addressed (It’s the Cost!).

  26. “Getting engaged has to be among the most romantic, fascinating and happiest time of the life; for both girls and guys. Selecting the right a single for many women is crucial. Guys that prefer to pick the engagement ring with no their partner realizing commonly come across it incredibly tricky unless they can be conscious of what their other half would like. In recent years significantly more girls princess engagement rings than ever are selecting their own ring in order for them to have 1 that’s just correct. This can also take the strain away from the man and ensure the answer yes’.”

  27. Uwe Reinhardt says:

    Although ip adresi’s sentences do not make any sense, he she or it is touching upon a fundamental question, namely:

    Why does a man have to give a woman an engagement ring when they decide to do a merger, so to speak, while she does not have to give him something in return, like a Harley Davidson or 50-cal. machine gun for hunting or stuff men need?

    We must ask Jeff Goldsmith about it.

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