If You Like Your Health Care Plan, Too Bad?


Let's hope you didn't really like your health care plan anyway, because if the health care overhaul in Massachusetts is any indication—and given that it's the model for ObamaCare, it probably is—getting too attached might be a bad idea, especially if you work at a small business:

The relentlessly rising cost of health insurance is prompting some small Massachusetts companies to drop coverage for their workers and encourage them to sign up for state-subsidized care instead, a trend that, some analysts say, could eventually weigh heavily on the state's already-stressed budget. Since April 1, the date many insurance contracts are renewed for small businesses, the owners of about 90 small companies terminated their insurance plans with Braintree-based broker Jeff Rich and indicated in a follow-up survey that they were relying on publicly-funded insurance for their employee

It's not entirely clear how strong this trend is right now, but it tracks with what many expect to occur widely as the PPACA swings into effect: Many businesses, especially those that employee fewer individuals, will choose to drop health coverage for their employees. Indeed, the CBO projected that about 3 million individuals would be shifted off their current employer-provided insurance, and many experts I've spoken to recently think that number is likely to be low. And the bulk of that shift is expected to come from small-business employees. That's because small businesses (defined as having fewer than 50 employees) don't have to pay a penalty to drop their coverage. So if employees can get subsidized insurance through the state, there's little financial incentive for small employers to keep giving health benefits. The article quotes the Kaiser Family Foundation's Larry Levitt as saying that "struggling business [sic] don't necessarily feel the need to offer coverage to attract workers." Well, struggling or not, they certainly don't when the state offers those workers a subsidized insurance option.

And as we've already seen, larger businesses may have incentives to drop coverage, too—even factoring in the penalties they'll have to pay for not providing insurance. AT&T, for example, calculated that it could save $1.8 billion by shifting its employees into a public program. Now, not every business will immediately kill health coverage under the law, but as time goes on, and the potential savings add up, it will be tougher and tougher for businesses, small and large, to keep offering coverage. Which means that those, contrary to Obama's promise, under the PPACA, those who like their health care plans may not actually be able to keep them.