Just ten days ago we described the latest unintended (we hope) consequence of the Affordable Care Act known as Obamacare, when Colorado’s largest nonprofit co-op health insurer and participant in that state’s insurance exchange, Colorado HealthOP, announcing it was abruptly shutting down ahead of the November 1 start of enrollment for 2016, forcing 80,000 Coloradans to find a new insurer for 2016.
It wasn’t the first: the Colorado co-op was at least the fifth in the nation to collapse. Similar nonprofit insurers have already failed in Louisiana, Iowa/Nebraska, Nevada and New York. A health insurance cooperative in Tennessee announced this week that it would stop offering new policies.
The insurer failed because it would fail to be profitable, in the process burning through $23 million in taxpayer-funded loss that would not be repaid. “Taxpayers are on the hook for millions of dollars in loans given out to the CO-OP, money that will likely never be repaid,” U.S. Sen. Cory Gardner said in a statement after the announcement.
And while many had anticipated from the beginning that the Obamacare tax was merely a subsidy for the large insurance companies (or rather, their public shareholders), few had expected a far more sinister consequence of the “Affordable” care plan: that the employer mandate would turn out to be unaffordable for a vast majority of low-income workers – the very people who were supposed to benefit from it.
But before we unveil this latest depressing, if also anticipated, outcome of socialized healthcare, let’s remember that much of the U.S. has press has touted the success of Obamacare. To be sure, nationwide, the Affordable Care Act has significantly reduced the number of Americans without health insurance. Around 10.7% of the country’s under-65 population was uninsured in the first three months of this year, down from 17.5% five years earlier, according to the National Health Interview Survey, a long-running federal study. Some 14 million previously uninsured adults have gained coverage in the last two years, the Obama administration estimates.
However, what is left unsaid is that most of those gains have come from a vast expansion of Medicaid and from the subsidies that help lower-income people buy insurance through federal and state exchanges. Workers who are offered affordable individual coverage through their employers — a group that the employer mandate was intended to expand — are not eligible for government-subsidized insurance through the exchanges, even if their income would otherwise have qualified them.
It is the failing of Obamacare to address the needs of America’s struggling lower-middle class, those women and men who work long, hard hours, often at minimum wage, scrambling to make ends meet. It is them, that the NYT writes about in its recent scathing critique of Obamacare (traditionally, it has been the WSJ that gives scathing reports on the disaster that is Obamacare, usually involving soaring monthly premiums for those who were dragged into the Scotus-enabled tax beyond their will).
Take the case of Billy Sewell who began offering health insurance this year to 600 service workers at the Golden Corral restaurants that he owns. He wondered nervously how many would buy it. Adding hundreds of employees to his plan would cost him more than $1 million — a hit he wasn’t sure his low-margin business could afford. His actual costs, though, turned out to be far smaller than he had feared. So far, only two people have signed up.
“We offered, and they didn’t take it,” he said.
But isn’t that against the stated primary objective of Obamacare: to make affordable health insurance more accessible and affordable to everyone? The answer, according to the NYT, is no.
The Affordable Care Act’s employer mandate, which requires employers with more than 50 full-time workers to offer most of their employees insurance or face financial penalties, was one of the law’s most controversial provisions. Business owners and industry groups fiercely protested the change, and some companies cut workers’ hours to reduce the number of employees who would be eligible.
But 10 months after the first phase of the mandate took effect, covering companies with 100 or more workers, many business owners say they are finding very few employees willing to buy the health insurance that they are now compelled to offer. The trend is especially pronounced among smaller and midsize businesses in fields filled with low-wage hourly workers, like restaurants, retailing and hospitality. (Companies with 50 to 99 workers are not required to comply with the mandate until next year.)
Hold on, aren’t those some of the “best” performing job categories in the past year? Why yes they are, in fact, with 11.1 million workers, those employed by “food service and drinking places” are the single largest job subcategory tracked by the BLS. It is almost as if the bulk of the jobs growth went to fields that would be mostly disadvantaged by Obamacare.
Well, there may be millions of waiters and bartenders in the US, but contrary to what Obamacare promised the vast majority are and will remain uninsured:
“Based on what we’ve seen in the marketplace, we’re advising some of our clients to expect single-digit take rates,” said Michael A. Bodack, an insurance broker in Harrison, N.Y. “One to 2 percent isn’t unusual.”
The reason? What was supposed to be affordable remains painfully unaffordable for the lowest rung of the employment pyramid.
Here is the actual math as experienced by both the abovementioned Mr. Sewell of Golden Corral restaurants, and his mostly minimum-wage employees.
He employs 1,800 people at the 26 Golden Corral franchises he owns in six Southern and Midwestern states, and previously offered insurance only to his salaried management staff. In January, when the employer mandate took effect, he made the same insurance plan, with a bigger employer contribution, available to all employees working an average of 30 or more hours a week.
Running the math on his plan — a typical one for the restaurant industry — illustrates why a number of low-wage workers are falling through gaps in the Affordable Care Act.
The annual premium for individual coverage through the Golden Corral Blue Cross Blue Shield plan is $4,800. Mr. Sewell pays 65 percent for service workers, leaving them with a monthly cost of $140.
The health care law defines affordable employer-sponsored insurance as that priced at 9.5 percent or less of an employee’s annual household income for individual coverage. (Because employers do not know how much money their workers’ relatives make, there are several “safe harbors” they can use for compliance, including basing their calculation on only their own employees’ wages.) Mr. Sewell’s insurance meets the test, but $65 per biweekly paycheck is more than most of his workers are willing — or able — to pay for insurance that still carries steep out-of-pocket costs, including a $2,500 deductible.
And this is where Obamacare’s employee mandate fails for a vast majority of US workers.
Clarissa Morris, 47, has been a server at the Golden Corral here for five years, earning $2.13 an hour plus tips. On a typical day, she leaves the restaurant with about $70 in tips. Her husband makes $9 an hour at Walmart but has been offered only a part-time schedule there, without benefits. Their combined paychecks barely cover their rent and daily essentials.
“It’s either buy insurance or put food in the house,” she said. On the rare occasions that she gets sick, she visits a local clinic with sliding-scale fees. It costs her $25 for a visit, and $4 to fill prescriptions at Walmart.
Other business owners find the same paradox:
Brad Mete, the managing partner of Affinity Resources, a staffing agency in Dania Beach, Fla., began offering insurance this year to most of his workers only because the law required it. He said the alternative, paying a penalty of about $2,000 per full-time employee, was unthinkable, “That would put us out of business, in one swoop.”
Trying to persuade his hourly workers to buy the insurance is “like pulling teeth,” he said. His company’s plan costs $120 a month, but workers making about $300 a week are reluctant to spend $30 of it on insurance.
That’s ok – if you beleive the Obama administration, wages are about to soar.
Or maybe not.
What is truly tragic, however, that just like in the case of “punishing work” when Earned Income Tax benefits for those living around the poverty line, see their after tax pay rise above what comparable workers who make up to $50k per year, Obamacare seems to have been designed only for those making above the median US wage and above:
A study by ADP, the payroll processing giant, found an income tipping point at which most employees who are eligible for health insurance will buy it: $45,000 a year.
Workers making $15,000 to $20,000 a year buy employer-sponsored individual insurance when it is offered only 37 percent of the time. That rate rises at every income increment ADP studied until $45,000, when it reaches 82 percent and levels off. Further income gains have virtually no effect on the rate, ADP found.
And so the wheels slowly fall off the socialized healthcare train:
Low-income, full-time workers like Ms. Morris may prove to be some of the hardest people to bring into the ranks of the insured, said Gary Claxton, a vice president at the Kaiser Family Foundation, which conducts an annual study on employer health benefits.
“This is one of the outcomes of trying to keep employer-based coverage in place,” Mr. Claxton said. “These are folks that didn’t have coverage before, and they’re not being given much help to get coverage now.”
Then, now that the disastrous law has been observed in practice, the result is nothing short of a bureaucratic nightmare, and everyone is scrambling to find loopholes:
Mario K. Castillo, a lawyer in Houston who has extensively studied the new law, said it was poorly understood in the industry, and a bureaucratic nightmare.
“They have to issue you a policy, but dropping it after one year is perfectly legal,” he said. “If you’re in this space, you essentially have to shop for insurance every year.”
But the biggest slap in Obama’s care comes from those who were supposed to be the direct beneficiaries.
For employees, forgoing coverage can mean facing tax penalties. Ms. Morris said she was surprised by the $95 fee she had to pay this year for being uninsured in 2014. “I had kind of heard about it, but I didn’t think it was going to kick in until later,” she said.
Around 7.5 million taxpayers paid the fine, according to a preliminary report by the Internal Revenue Service. That is significantly more than the three million to six million the government had forecast.
Actually, considering central planning and government takeover of private industries always leads to disaster, it is more surprising that the number isn’t far, far greater.
As for those tens of millions of minimum wage workers, who thought they had a right to “hope” for “change”, and instead ended up even worse off – as well as unisnured and paying a penalty – our apologies, especially since it is all downhill from here. What you should have done is buy the stock of health insurance companies: because their shareholders’ gain (and your loss) is what the “Affordable” Care Act is truly all about.