September 29, 2013

Obamacare: October 1st — When The Rubber Meets The Road

by Hal Gershowitz

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We, and many others, have commented at great length about Obamacare—how it was legislated and litigated, the avalanche of rules (20,000 pages and counting), the unintended consequences, and the impact it will have on the health of the people and the manner in which healthcare is provided. This week we will begin to learn a lot. On Tuesday, October 1st, the opening bell sounds as the Insurance Exchanges officially open and the Individual Mandate becomes effective.

It is axiomatic that people and employers generally will act in their economic self‑interest, and we assume that will be true with respect to the so-called Affordable Care Act (Obamacare).

In 2010, shortly after President Obama assumed office, Obamacare was passed on a purely partisan basis without a single Republican vote, and thus began a saga, as various interests have weighed in on the question of whether or not this Act will reduce healthcare costs and make affordable coverage available to all Americans. Most Republicans and an interesting assortment of strange bedfellows including trade unions, small companies, a surprising number of very large companies, many physicians and the young and healthy (who will pay more) are becoming loudly vocal in voicing opposition to Obamacare. This is particularly significant given this week’s October 1st start-up date.

While many employers have chosen not to provide health insurance under Obamacare, many who were expected to participate have also elected not to do so.  As the Washington Post reports:  “As more about the law is learned, more problems come to light.  Two groups crucial to the healthcare law’s success, employers and young adults, are beginning to see that the costs may be outweighing the benefits.”

Participation by employers is, of course, critical to making the law work.  The law assumes that a sufficient number of employers will continue to offer coverage.  But will they?

Many employers have begun cutting back on the hours their employees work to under 30 hours a week (the level at which providing coverage is mandatory), to avoid the high cost of Obamacare. The Obama Administration, fearing poor employer participation, deferred enforcement of the employer mandate for a year while holding fast to the individual mandate which becomes effective next week. This means that a growing number of the very people who were supposed to benefit are now going to go to work each day as part‑time employees.

Listen to Bob Funk, President of Express Employment Services, the nation’s fifth largest employment agency commenting in the Wall Street Journal. “Obamacare has been an absolute boon to my business…I’m making a lot of money thanks to that law…. But it’s just terrible for the country. Firms are just very reluctant to hire full-time workers…so they are taking on more temporary help, which is what we do.” 

Obamacare may have created a “new normal” in America. Many men and women will be relegated to part-time status, and will have to shop for health insurance on their own and many may well decide to go without it.  The cost‑benefit of buying insurance or paying a nominal penalty and applying for insurance only when one gets sick suggests that Obamacare may be a tough sell for young, healthy workers.   They are generally less costly to cover because they are healthier, but under Obamacare actuarial underwriting has been thrown to the wind, and they (the young and healthy) are expected to pay more, thereby subsidizing costs for older citizens who have greater health care expenses. The Administration is counting on about 40% (2.7 million) of the 7 million  enrollees who are expected  to sign up at the healthcare Exchanges next week to be young and healthy. Obamacare needs these young, healthy, low-cost enrollees to sign up to make the system work.  But surveys show that a large number of those young, healthy adults do not intend to sign up.  Why should they?

Simply stated, the artificially higher premiums imposed solely because of their good health will make the cost of their premiums much higher than the penalty for not purchasing government approved coverage.  Thus, many young adults may simply pay the lower price penalty instead, and apply for (and obtain) insurance should they get sick.  And, unfortunately, regardless of their decision to pay for coverage or opt for the penalty, many will now find that only part time jobs are being offered to them because of Obamacare.

Then there is the matter of the almost scandalous carve out which Congress (both Democrats and Republicans) has provided for the young men and women who just happen to work for them.  The law required congressional staffers to be subject to the Obamacare Exchanges just like millions of other Americans.  But Congress has decided to exempt their staffers from compliance.  What’s good for thee is not good for me if “me” happens to work for the right people.

The Wall Street Journal editors recently revisited the maneuverings of Congress and  the Obama Administration to work around the rule that subjected our fine Representatives and Senators and their staffs to Obamacare.  It is worse than they thought.  The White House has granted legally dubious dispensation for the ruling class, conferring different rules for the hoi polloi.

The law requires all 11,000 congressional staffers to purchase their health insurance through the Obamacare Exchanges, but that would be considerably more expensive for them then their current healthcare plans. So the Office of Personnel Management simply changed the rule for them so that their Exchange premiums could not exceed the cost of their current premiums.  Millions of men and women throughout America are also going to be directed to the Exchanges because of Obamacare when their employers no longer provide coverage.  If these Exchanges are so good, the reasoning went, let the staffers who created them use them too.

We commiserate with those staffers who faced higher premiums, but what about those workers throughout America who do not work on Capitol Hill who also now face higher premiums at the Exchanges? How’s that for a double standard?

This past week there were numerous press reports that the software required to process the millions of applications that are expected beginning next Tuesday when the ready or not here we come, mandate becomes effective may not be ready.

There isn’t much that can be done to reform Obamacare because, the President undoubtedly would veto any revision or defunding that tampered with the law.

So, next week, when the Obamacare Exchanges are scheduled to begin operation, we may learn whether the President is the engineer of real healthcare reform or of a healthcare train wreck.

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