What Obamacare Does to the Middle Class Budget

Terry Jeffrey helpfully boils down a key portion of the Congressional Budget Office’s take on the Senate health care bill: how it would affect an average middle-class family’s bottom line. How does another $15,000 in “fees” (or, taxes if you want to call ’em that!) sound? Here’s a summary of his summary

Fact 1: You will be forced to buy health insurance…
Fact 2: You will be eligible for a federal subsidy to help you buy health insurance, but only if you earn less than 400 percent of the poverty level ($88,200 for a family of four), your employer does not offer you coverage and you purchase a government-approved plan in a government-regulated insurance exchange…
Fact 3: Your employer will not be required to offer you coverage, and will face a maximum fine of $750 per worker per year if it does not…
Fact 4: Your insurance provider will face new federal mandates that will increase its cost for any plan it offers you…
Fact 5: Your family insurance plan — if your employer drops your coverage and you are forced to buy it on your own — will cost about $15,000 per year when the legislation is in full force in 2016…
The Senate health care bill gives employers two powerful incentives to stop offering health insurance coverage to their workers. First, if an employer does offer coverage, its lower-wage workers will lose the federal insurance subsidy they would otherwise get. Secondly, if an employer does not offer coverage, the $750-per-worker fine it faces will be far less than the premiums it would pay if it did offer coverage.
Where does this leave a mom and dad with two children and an annual income greater than $88,200? It leaves them without employer-based health insurance and facing a federally mandated $15,000-per-year insurance bill.

Such a deal!

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Patrick
Patrick
11 years ago

“The Senate health care bill gives employers two powerful incentives to stop offering health insurance coverage to their workers.”
I have a question here. Today, there is no fine for an employer to not offer health insurance. So why do employers offer it today? And why would they stop when they would then get fined, if they were offering it when they wouldn’t get fined?

EMT
EMT
11 years ago

So why do employers offer it today?
The same reason for competitive pay scales- to attract and retain employees.
And why would they stop when they would then get fined, if they were offering it when they wouldn’t get fined?
Because offering insurance costs them FAR more than $750 per employee.
The smart, economical move for most small to mid-sized businesses will be to end their healthcare plans.
My healthcare costs my employer almost $1000 per month. Stack that against a $750 per year penalty for NOT spending $1000 a month- what would YOU do?

Marc
Marc
11 years ago

Valid question. Employers offer healthcare as a benefit and in a competitive marketplace it makes good business sense to attract employees with some sort of plan. Especially when it is through their employers that most people have to–indeed, expect–to obtain health coverage. It is the norm both in a business sense and socially.
But now, with a government option (whether it’s called that or not, that’s what it is) there is another “reasonable” option for employers to point their employees towards. In fact, that is exactly what is wanted! The hope is that employers will embark on a mass exodus away from providing benefits and make the government plans the de facto options. This is an attempt to establish a new norm.

Mike Cappelli
Mike Cappelli
11 years ago

The fascist Obama wants government to run everything!
Anybody who fell for this liar is stupid.

Patrick
Patrick
11 years ago

EMT, you’re arguing both ways. On one hand, you say that businesses offer it now because it’ll attract and keep employees but then you say they’ll drop it because the fine is cheaper than paying for it.
Which is it? Won’t those businesses want to still attract and keep their employees or won’t that matter any more? As of this minute, businesses can save $15,000 per employee by not offering health insurance. When this passes, they’ll save $14,250 by not offering it. So if they’re offering it today, why won’t they later?
Marc, you said “Employers offer healthcare as a benefit and in a competitive marketplace it makes good business sense to attract employees with some sort of plan.” and then you said “But now, with a government option (whether it’s called that or not, that’s what it is) there is another “reasonable” option for employers to point their employees towards.”
But is it “reasonable” for an employee making $50,000 a year to pay $15,000 a year for health insurance? That’s about what it would cost right now if an employer did not offer health insurance, and there’s no penalty for not doing so.
I suspect some businesses will drop health coverage, but the smarter ones will realize that they will attract and keep employees by paying for it. And employees at the companies where their health care is dropped will leave for the business that offers it, leaving no-insurance company to wallow with lesser employees.

joe bernstein
joe bernstein
11 years ago

When the government kills someone resisting mandatory health insurance,it will be the trigger.This time it won’t be a neo-Nazi like Randy Weaver or a nutjob cult like Koresh’s followers-just some ordinary American(a foreign term to Obama even though I’m sure he was born here)who dared to stand up to the likes of Sheldon.
Maybe Sheldon will find out that tumbrels for aristocrats aren’t necessarily out of style.

Marc
Marc
11 years ago

Patrick, What both EMT and I are saying is that, by design, this health care plan is a gamechanger that seeks to–eventually–have single-payer health care. Barring legislative action and aside from the heartfelt wishes of the most strident progressive, it won’t happen over night, but employers will eventually get out of the game. Maybe not all at once, but it will happen. (Many want that to happen, but prefer that the driver be the consumer not the government).
Don’t discount the ability of employers to take advantage of the new norm. I suspect many will pay the fine and tell current and prospective employees that they will be paid more in salary because the boss won’t have to deal with the obvious and hidden costs (HR admin, etc.) of managing health care. Sure, that increase may be eaten up by the government plan, but whose fault will that be?
Like I said, you have a valid point. It’s one possible outcome. But I’m placing my bet on the opposite.

EMT
EMT
11 years ago

s. On one hand, you say that businesses offer it now because it’ll attract and keep employees
Up to this point, yes it has.
Not anymore.
And that’s what Democrats want.

Justin Katz
11 years ago

Patrick:
1. The costs of healthcare and insurance are going to continue to go up, decreasing the monetary advantage to businesses of offering health insurance rather than a higher salary.
2. From the employee’s perspective, health insurance will no longer be “from you or nowhere.”
3. Therefore, employers will have incentive to do what they’ve increasingly wanted to do, and marketwide expectations will no longer restrain them.

Patrick
Patrick
11 years ago

To Justin’s points:
“1. The costs of healthcare and insurance are going to continue to go up, decreasing the monetary advantage to businesses of offering health insurance rather than a higher salary.”
Are you saying that if I make $50,000 a year now, plus my employer picks up 75% of my health insurance (about $11,000 cost to them), that they’ll drop me and pay me some fraction of that $11,000? I don’t see that happening. Wouldn’t the employers just keep the whole $11,000 for themselves?
” From the employee’s perspective, health insurance will no longer be “from you or nowhere.”
Sure it will. If my employer doesn’t offer health insurance, and I go to BCBS and get a family plan, it’ll cost me about $15,000 a year. If my employer drops my health insurance under this new plan, it’ll cost me about $15,000 a year. I don’t see what will have changed.

Andrew
Editor
11 years ago

Patrick, 1. If you’re employer really wants another $11,000 per year, they don’t have to wait for healthcare to change. They could just keep the healthcare portion of your compensation the same and tell you they’re cutting your salary by $11,000 tommorow. Why don’t they do that now? 2. The dynamic that you suggest (that is a possibilty that can’t be completely dismissed in every case) is why the plan that makes the most sense is giving the tax break to individual insurance purchasers that now given only to corporate insurance purchasers, i.e. here’s the salary you were making before, plus here’s the money that we were spending on your healthcare, that is tax-free to you, if you spend it on insurance. 3. Going to the individual market isn’t as simple as paying a higher price for the same product in the group market. Studies from organziations like the Commonwealth Fund report that what’s covered in individual policies is often more limited that what’s covered in group policies, and that some people can’t find coverage at any price. Think of it this way. Take the last x-number of people laid off in Rhode Island. The day after they are laid off, they are exactly the same insurance risk that they were the day before. Why shouldn’t they be able to keep paying for the same policy they had before because their employer changed? How does that make sense? 4. But the most important question to ask is why the Democrats are completely disinterested in changing the tax code and regulatory advantages that corporate purchasers of health insurance have over individuals in their overhaul of healthcare In the “reformed” system, with the corporate/individual inequality still in place, you’ll be able to get a plan from your employer, or a similarly priced… Read more »

Justin Katz
11 years ago

I’d also point out that Patrick is arguing both sides of the perspective, with this:

Wouldn’t the employers just keep the whole $11,000 for themselves?

First, he suggests that employers won’t drop healthcare now, because nothing should change their currently displayed motivation to provide it. The response is that the equation will change sufficiently that they’ll offload healthcare management while providing some residual benefit in the form of healthcare subsidies, to which Patrick argues that they’d just take all the savings from canceling health benefits.
But why must it be all greed or all benevolence? As the government forces the price of insurance up (mandated coverage, no drops, no prior condition refusals, etc.), employers will be less and less inclined to cover the increases and will find decreasing PR/HR points the more they directly deduct from employees’ paychecks. They will, however, wish to maintain maximal employee good will and job-market competitiveness, which they can accomplish with lump-sum subsidies for individual purchases.
Not sure what’s confusing about this.

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