Obamacare business fine delay: good politics that doesn’t stop a thing.

Some headlines out there for this one. Very few commenters seem to have the sense of what the announced delay really means.

Regular followers of the Affordable Care Act implementation might remember that a couple months ago, the administration determined that certain small-employer offerings would NOT be available until 2015 in the states that have federally-run health insurance exchanges. As you recall, the only policies that would be offered in 2014 for small employers were at the Bronze (60%) metal level.

Small employers (those with less than 50 workers on a “full time equivalent” basis) face no penalties under Obamacare, and never did. Out of carrot and stick, the only thing Affordable Care puts out for small employers is a carrot: they can receive tax credits for offering health insurance to their employees.

What I suspected [that] narrowing the exchange offering would do is encourage workers for small employers to pick up their own, individual, policies on the health exchange. After all, insurers on the exchange will be required to offer at least one Silver (70%) and one Gold (80%) level plan. But the only thing that will be available in the first year to the employers are Bronze plans. PLUS, in many, many cases, the employee will be eligible for the Section 36B tax credit. The credit, in many instances, is much more valuable than receiving “tax free” insurance coverage from the employer.

Now, the Obama Administration has also announced that the larger employers–94% of whom already offer coverage to their employees–won’t be fined if an individual working for one goes out and buys a policy on the exchange. Additionally, the 6% of companies who don’t offer health insurance are going to have a bunch of employees who discover that they can get a comprehensive policy on the exchange—which will cover more than Bronze level. Once they discover this, they’re not going to want employer-provided insurance.

So both decisions have, as their clear end result, the move of potential health insurance customers away from the employer-provided market and toward the federally-subsidized exchange market.

Who really loses in both the changes are whoever is going to have to make up the tax from the penalty waivers. (You can call it “fines”, “fees”, etc. but it all goes into one big pot called U.S. Treasury, along with taxes.) The waivers are just a big, one-year tax cut for businesses who don’t already provide health insurance.

Will the 94% of large businesses turn around and drop coverage? Highly unlikely. If they did, their employees would also just go onto the exchange and get a policy. It will be the same insurance companies, whether going through the employers or going through the exchange.

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