If You Like Your Health Care Plan, Too Bad


Remember when President Obama promised that under his health care plan, "if you like your health care plan, you can keep your health care plan?" Well, probably not. 

They're coming for the exchanges.

As even the folks at TPM admit, that promise was "never completely true." Estimates released by the Congressional Budget Office indicated that four million individuals would be shifted from their current employer sponsored insurance to the government-run health insurance exchanges created by the health care overhaul. 

A study released earlier this week by the consulting group McKinsey suggests the actual number of employers who choose to dump their employees into the government-run exchanges could be quite a bit higher, leading to what the report calls a "radical restructuring" the health insurance marketplace.

From Reuters:

At least 30 percent of employers are likely to stop offering health insurance once provisions of the U.S. health care reform law kick in in 2014, according to a study by consultant McKinsey.

McKinsey, which based its projection on a survey of more than 1,300 employers of various sizes and industries and other proprietary research, found that 30 percent of employers will "definitely" or "probably" stop offering coverage in the years after 2014, when new medical insurance exchanges are supposed to be up and running.

"The shift away from employer-provided health insurance will be vastly greater than expected and will make sense for many companies and lower-income workers alike," according to the study, published in McKinsey Quarterly.

There's some reason to be skeptical of McKinsey's numbers. For one thing, the survey methodology is somewhat murky. As Time's Kate Pickert points out, survey respondents were "educated" about the health care overhaul's "implications for their companies and employees" before questions were asked. Was is the sort of education that might bias respondents toward one sort of answer? We don't know because McKinsey, when asked, won't say. 

Yet McKinsey isn't alone in suggesting that far more employers might drop coverage that expected: The Urban Institute, for example, predicted last October that, thanks to ObamaCare, over the next decade or so, "droves of employees—potentially tens of millions—are likely to shift out of employer-provided insurance." Financial services firm Credit Suisse thinks McKinsey's estimates are on the right track, calling it "the most convincing estimate we've seen" and estimating that as many as 50 percent of employers will drop coverage as a result of the law. 

The incentives built into the legislation are pretty straightforward: Employers who don't offer coverage will have to pay a penalty. But the penalty in many cases will be far less than the cost of coverage. So even with the penalty, they'll be able to shift employees into the subsidized exchanges, save money, and perhaps even give their employees a raise as they do. As Credit Suisse's response says, "While the figures are staggering, they are simply an economically-rational response by employers to federal health policy to shift the U.S. from an employer-purchased to an individually-purchased insurance market."

This isn't a new worry. As year ago, former Bush administration health wonk told me that he thought it was quite likely that CBO's estimates were low by a substantial margin. "Any state that has a huge number of small employers and individual entrepreneurs and small businessess is going to have floods of people into these exchanges," he said. Capretta later teamed up with former CBO director Douglas Holtz-Eakin to estimate that, over time, it's a safe bet that roughly 35 million people will end up in the exchanges. 

More people in the exchanges, of course, means more taxpayer money spent on middle health insurance subsidies, since most of the workers who hit the exchanges will probably earn less than 400 percent of the poverty line, the limit at which a family can receive subsidies under the law. Depending on how many workers (and from what income levels) jump the ship of employer coverage for the exchanges, Holtz-Eakin estimates that the cost to taxpayers could be an additional trillion dollars over th next decade.

Obama's broken promise aside, breaking our system of employer-sponsored health insurance isn't necessarily a bad thing; the only reason it exists in the first place is because of the legacy of post-WWII wage controls (companies offered benefits like health insurance instead). But this seems like an awfully expensive way to do it. 

NEXT: Tim Cavanaugh Talks DOE Raid on KOGO 12:35 pm Pacific

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  1. I love the TPM “well it was never completely true”. Of course they were not saying that in 2009 were they? Lying sacks of shit. It is a typical team blue tactic. Lie your ass off and then when it is shown you were lying just say “this is old news, everyone knew this years ago”

    1. So, it was a lie? Okay, everyone involved in that has to resign now, right?

      If not, why not?

      1. Why would they have to resign for doing what they were supposed to do?

        1. We–the people, I mean–need to raise our standards, not continually lower them. I say we demand the expulsion of any politician caught definitely lying about anything. They spin the shit out of so much and are so vague in most of their pronouncements that we only occasionally catch outright fibs. When we do, out you go.

          1. The problem with that, PL, is that the people that sent the men and women who voted in Obamacare did so with the implicit mandate to do whatever it took to get it passed, including lie. Why would they get tossed for doing what they were sent to do?

            1. If we continue to lower our standards, we shouldn’t be surprised when politicians continue to race to meet those low standards.

              1. Can I send you a pic of my “little friend?”

    2. John, this is not a “Team Blue” tactic, it’s the hammer in any politicians primary tool bag and you know it. That Obama is more obvious than his predecessor is of minor significance.

      1. See Clinton, Bill for the best example of this tactic. I am saying Bush didn’t lie about things, all politicians do. But the old “this is just old news” dodge is something that the Democrats seemed to have prefected.

        1. Come on John, Bush used the “old news” tactic a lot. How many times did you hear the Bush admin say they couldn’t comment on X because it’s under investigation, and then when the investigation was over, they said it was old news and not going to discuss it?

          It’s silly to call it a team blue tactic when it’s clearly a tactic used by both teams. If anything, it’s an Oval Office tactic.

  2. So employers who drop/change coverage make the claim “you can keep your current coverage if you like it” a lie?

    That defies any known logic.

    The employer is the party deciding the fate of the employee here.

    Employer: “Hey, I can save a few bucks by fucking over my help here!” – is not an argument that is new.

    1. “You can keep your coverage if you like it” but leaving out “I am going to enact policies that cause many of you to loose your coverage” is a lie. Only someone of your limited rational ability would not see that.

      1. Wal-Mart has been telling their employees to go into Medicaid for years, you idiot.

        This is nothing new at all.

        1. What the fuck does that have to do with the price of tea in China you fucking moron? Obama told people “if you like your coverage, you can keep it” knowing full well that people would take that to mean that his plan would no affect existing plans. But all the while he knew full well that his plan would cause many existing plans to go away.

          It is called lying by ommission you stupid fuck.

          1. “lying by omission” – you sound like a ditzy chick.

            Bushy-boy creates a new entitlement; Medicare Pharma Welfare, and you lick his ass-crack – Obama creates a market-based exchange and you shit your diapies Vitter style.

            Talk about partisan.

            1. Cuz nothing sez “market-based” like a government-erected, government-run and government-financed organization.

              1. Why. Do. You. Argue. With. A. Completely. Obvious. Sockpuppet.

                1. Because I am stupid.

                  1. You realized this is going to quoted more than Max’s “I’m outta here” post, right?

              2. “government-erected”

            2. “”Bushy-boy creates a new entitlement; Medicare Pharma Welfare,””

              That came with a mandate btw.

        2. Wal-Mart has been telling their employees to go into Medicaid for years, you idiot.

          And empty headed democratic party fellators like yourself have roundly decried that as a horrible corporate practice and vile imposition on the government.

          Sheik you should really write stuff down so you can keep your story straight.

  3. So far, the bear has withstood a tranquilizer dart Monday and resisted a trap baited with doughnuts, marshmallows and maple syrup.

    Sgt. Ted Jackson says agents are following the bear to make sure it hasn’t developed a taste for children.

    1. rectal is as incompetent with HTML tags as she is with rational thought or punctuation. Unsurprising.

      1. If it were rectal, wouldn’t she be blogwhoring? I think it might be time for you to give in to incif/reasonable and take the paranoia rage down a notch or two.

        My company has a fulltime healthcare benefit officer. We are not a big company so I’m not entirely sure what her job is. Though, I do know that Obamacare is pretty much the reason why her job exists at all.

        1. So you’re jealous that she’s not stalking you? Please, take her. You seem like you’d be quite a match with her.

  4. i don’t think anyone ever believed that was true, the idea was to make it unfeasible to obtain private insurance so the govt would have no choice but to implement a single payer system

    1. They all knew it was a lie. Every liberal who argued for Obamacare knew everything they said about it was a lie from this to “bend the cost curve”.

      And I don’t think they were even sophisticated enough for it to be a big plot or to think about what it was really going to do. They just wanted to pass something “historic” and get their “healtcare reform” and feel good about themselves and rub the other teams’s nose in it.

    2. idea was to make it unfeasible to obtain private insurance

      Sounds like a Rush (King of the Rednecks) Limpdick lie.

      The private insurers stocks have doubled since passage – UHC, Humana, Wellpoint, Cigna – all of them.


      1. It’s all about timing with stocks. Buying now makes sense, when Obama’s stampeding people into buying their product. It’s not going to make a lot of sense once the rest of the law kicks in and they realize Obamacare was a giant meteorite and they’re the dinosaurs.

        1. If they were being “driven out of business” like PigBoy and melman say would their equity double in value?

          Of course not.

          We are moving to a regulated managed care model – like the utility industry did decades ago.

          1. Like I said, it’s all about timing. Right now, Obama is herding people into these collectives and the companies will see the additional revenue. Once they have to start paying out 85% of that revenue in claims, however, it will be another story.

          2. If stocks never went up by massive amounts two years before bankruptcy occurred then WorldCom would still be a valuable investment.

            Health insurance could be in a precarious position in 2-5 years due to regulatory changes, you have no idea and neither does anyone else here. But it’s a good idea to look at what’s been happening in Mass for clues since their model is, by everybody’s estimation, the prototype for ObamaCare.

  5. You can always count on government to create a fix more problems for problems they created in the first place.

  6. You realize this is not news… We have known this since before Pelosi and her giant gavel was in the news. Before Pelosi said we must pass it to know whats in it..
    Again… this is not news. WE CONSERVATIVES KNEW IT OVER A YEAR AGO.. No one listened….

  7. “awfully expensive”? Hey, what’s another trillion dollars to this administration? Pocket change, judging by the way they spend it.

    1. Reminds me of a comedian joking about Paul McCartney losing his wallet.

      Linda, have you seen me wallet? I had a hundred million in me wallet. I hate it when I lose a hundred million. It gives me a headache.

  8. The private insurers stocks have doubled since passage – UHC, Humana, Wellpoint, Cigna – all of them.

    False. I only checked Wellpoint, but when the bill was signed (March 23, 2010), WellPoint was trading at $63.61. It promptly began shedding value, down to $47.79 on July 21. Today, it closed at $77.75, a long way short of doubling.

    Since the law was signed, WellPoint underperformed the S&P until the beginning of last month.

    1. You’re right on Wellpoint – they are more Medicare/caid. I screwed up.

      Aetna, strictly private insurance, has gone from mid 20’s to mid 40’s in that time period.

  9. OK, Humana is up 60% since ObamaCare passed, and the S&P is up 10% in that time. Humana only began outperforming the S&P in February of this year.

    Still no doubling. Outperforming the broad market began only recently. I’m thinking whatever is driving this stock, its not the likelihood that money will start flooding in when the OCare mandate switches on in 2 1/2 years.

  10. It’s not just private employers who are going to drop coverage like hot potatoes. Former Tennessee governor Phil Breseden claims public employers will also be dropping their policies. The collapse of employer provided insurance will be the beginning of the move to medicare for all. Here’s Breseden’s article in the wsj:

    1. One more try: http://online.wsj.com/article/…..15252.html

  11. Cigna, up 30% since passage. Finally separated itself from the S&P in mid-April of this year.

    Sorry. No sale.

  12. “While the figures are staggering, they are simply an economically-rational response by employers to federal health policy to shift the U.S. from an employer-purchased to an individually-purchased insurance market socialized healthcare.


  13. However, if the study is correct, it would increase the projected cost of the law to the federal government taxpayers.


  14. Can an employer have a policy of only offering coverage to some employees? It seems like upper management of most (even relatively small) companies is easily going to have incomes over the $90,000 threshold for subsidies. That would mean they would likely not want to drop it for themselves and get stuck with paying full premiums with after tax money on the exchanges. If they could only offer some employees coverage, then they could do this, but I thought there were limits on tax deductibility if you didn’t offer it to everyone. Anyone know?

Please to post comments

Comments are closed.