How Many Employers Will Drop Health Coverage Under ObamaCare?


When the CBO estimated how many individuals would end up shifting away from their current employer-sponsored health care coverage under the PPACA, it found that 3 million workers would likely lose their current coverage. But it's increasingly looking like that estimate could be low: A number of big employers are already considering dropping employee coverage, and a new study from former Congressional Budget Office director Douglas Holtz-Eakin and Cameron Smith suggests that, depending on the details of the insurance employers currently offer, the number could be far higher. According to their analysis, the law "provides strong incentives for employers–with the agreement of their employees–to drop employer-sponsored health insurance for as many as 35 million Americans." If that happened, it would raise the bill's cost from about a trillion dollars to an estimated $1.4 over the first decade.

Here's the gist: Thanks to a combination extremely generous subsidies extended even to families making comfortable middle incomes and relatively weak employer penalties, it may be cheaper for employers to drop coverage. In addition, the value of the subsidies may be effectively greater for many employees than the coverage they would have gotten through their employers. Liberal supporters of the bill will no doubt say that's exactly the point—to provide more valuable coverage to those in lower and middle incomes.

But as Holtz-Eakin has pointed out previously, the law's deficit assumptions are unrealistic, and total taxpayer cost for all those subsidies is enormous and unsustainable. Even if you buy the deficit-reduction assumptions employed by the bill's advocates—which are dodgy at best—a wave of unexpected employer coverage drops would wipe out any deficit reduction. No matter how you look at it, the PPACA is likely to be a budgetary catastrophe.