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Patient Protection and Affordable Care Act – The Rebuttal

Posted in Healthcare Services Investing

In prior posts we have discussed financial data released by the Obama administration regarding the financial upside of the Patient Protection and Affordable Care Act (PPACA), the healthcare reform law. Recently, we discussed a current study by the Centers for Medicare & Medicaid Services (CMS). Not surprisingly, opponents of the law are eager to publish findings supporting their point of view. But in response to an inquiry from House Ways and Means Committee Chairman Dave Camp (R-Mich), 71 Fortune 100 companies (out of 100 polled) stated that they could save approximately $28.6 billion in 2014 alone by not providing health insurance for their nearly six million employees.

The facts: PPACA requires employers with more than 50 employees who meet the legal definition of full-time workers, to offer health insurance that meets the qualifications for being affordable, beginning in 2014. The law imposes employer fines, payable as an excise tax; employers that do not offer coverage must pay $2,000/employee after exempting 30 employees. If said coverage is deemed to be unaffordable under the law and employees qualify for subsidies in the health insurance exchange markets (which are to be in place in 2014), employers will be fined $3,000/year for each employee who receives the subsidies. The penalties will be indexed to the average per capita premium for health insurance after 2014.

 The report, BROKEN PROMISE: Why ObamaCare Will Force Americans to Lose the Health Care Coverage They Have and Like, authored by the committee’s majority staff, states that PPACA “threatens the stability and sustainability of the employer-based health insurance system—even among the nation’s most prosperous companies”.

In an article by Sara Hansard, writing for Bloomberg/Bureau of National Affairs, the GOP avers that the majority of these giant companies would save $422.4 billion from 2014 through 2023 by eliminating employee health insurance coverage and paying any penalties. Since the cost of paying the penalties is much cheaper than the cost of providing health care coverage, employers will need to make a tough economic choice. This conundrum could affect some 10.2 million employees and their dependents. Individually, these companies could save an average of $402.3 million or $4,821/employee on an after-tax basis in 2014, by opting to pay the fines instead of health insurance. From 2014-2023, the average employer responding to the survey could save $5.9 billion or $9,999/employee, according to the report.

Eighty-four percent of the employers who responded to the poll felt that future health care costs will increase at rates higher than the increases of the last five years, the report continues. Employers’ costs, which increased 5.9% annually over the last five years, are predicted to rise 7.6% annually over the next few years. These increased costs, companies aver, could lead to increased unemployment as many businesses will simply not be able to afford the cost of insuring their workers.

In 2010, some 170 million Americans received health coverage benefits from their employers, the largest source of health insurance in the nation. Representative Camp argues that “Anyone who gets insurance through their job should be worried what will happen next, because there is a distinct financial incentive for employers to terminate health care coverage under the Democrat’s health care law”.

In response, spokesman for the Ways and Means Committee Democrats, Josh Drobnyk, rebutted the Republicans stance, saying that the Republican report’s assertion that employers may eliminate workers’ health insurance is “a cynical assertion that ignores the fact that the largest and most successful American businesses for years have voluntarily chosen to offer health coverage to workers Employers provide coverage because it a valuable recruitment tool and retention benefit and because it helps keep their workers healthy and productive.”

Paul Dennett, senior vice president for health care reform at the American Benefits Council, which represents mainly large employers that provide both health and retirement benefits to over 100 million Americans, told BNA that employers’ decisions to continue employee coverage post-2014 will involve “many other dimensions than just the question of the after-tax expense of health care vs. the cost of the penalty”.

 And the debate continues.

 

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