Real objective is to “cut loose” employees from employer provided healthcare
By Rob Roper and Lindsay Smith
There has been a misperception fostered by the Shumlin Administration that federal healthcare law compels the state to force businesses of 50 or fewer employees by 2014 into the insurance exchange that is demanded by the Affordable Care Act, and that states only have discretion regarding whether or not to force businesses of 51 to 100 employees into the exchange. It turns out this is not true. The Affordable Care Act actually gives states a lot more latitude.
As Shawn Shouldice of the National Federation of Independent Businesses/Vermont points out, “Yes, the State has to set up an Exchange, but no they do not have to force small businesses into the Exchange. The Kaiser Family Foundation, a leading analyst on the health care law explains the exchanges. The language is all permissive. There’s nothing in there mandating states to require all small businesses to be in the exchange. The exchanges are specifically for businesses that want to use them, or for people who don’t get their insurance through work.”
However, the Administration has other motives and objectives that are becoming more clear as the health care debate in Vermont unravels. By forcing small businesses into the exchange now, the Administration sees an opportunity to make the cost for employers to offer healthcare to their employees so prohibitively high that employers will dump health insurance altogether and “cut loose” their employees.
As Steve Kimbell, Commissioner of BISHCA said at a recent press briefing, “The obvious benefit of
the Affordable Care Act is to get health insurance off the backs of small employers… and that’s more than 2/3 of the people that work in the state of Vermont.” His advice to small business owners: “If I were a small employer I would educate my employees about their options and turn them loose.”
Loose inside the exchange, these individuals would qualify for federal subsidies, and the amount they pay would be capped as a percentage of household income up to 400% of poverty level , which is just over $92,000 per household. “If your income is X, you don’t have to pay more than a certain percentage of your income for healthcare, explained Kimbell. “We’ll [the Feds] pay the rest. So, if you’re right at the top of the eligibility scale, which is $92,500 for a family of four, you’re going to pay 9.5% of your income for your health premium. If you’re down at the bottom [at 100% of poverty], you’re going to pay about 2%.”
This sounds a lot like the income sensitivity provisions of Act 60 for education finance. It is worth noting that since Act 60 was put into place, education costs have risen by 149% in Vermont, the fastest rate of growth in the nation. Hang on to your hats when this dynamic is applied to healthcare!
Robin Lunge, Director of Healthcare Reform, calls this a “win/win.” The employer will no longer be paying for health insurance, and the employee might qualify for more dollars in federal subsidies for healthcare than they were receiving in healthcare compensation from their employer.
But this is like most deals that appear too good to be true – it is. The money that the employer is no longer paying and the increased money the employee might (or might not) receive has to come from somewhere. Now it’s the federal government. But is this substantial chunk of change a sustainable proposition from a government that is $16 trillion in debt, coming under a law that could very well be overturned by the Supreme Court as early as June? There is also the logistical nightmare of switching 60% of the state’s population out of their current insurance plans and into something else literally overnight. Good luck with that.
What will these companies do with the windfall? Lunge says they can give their employees a raise, and that sounds wonderful. However, that is not likely to happen given the fact that in 2017 or shortly thereafter, the current Administration’s intention will be to move to a single payer healthcare plan that will likely rely on a 14% payroll tax. Any saving enjoyed by these small businesses in the short term would be swallowed up these taxes in just a few years.
Asked about this eventuality, a smirking Lunge answered, “Well, as you know we have a financing plan that’s due in 2013. And, we’ll be looking at all the different options for how to finance that plan, but it’s premature for me to say…”
Asked why it didn’t make sense, if the Feds were going to be picking up all of the tab over certain percentages of income, it doesn’t make sense to just pick the plan that offers the most services and let the feds pick up the tab, Lunge pointed out that, “The subsidies go up to 400% of poverty, so there could be people above that income level [Could be? Right now it’s about one third of the state, but maybe no longer if this idiotic plan passes], so you have to be sensitive to what price they would pay, as well as not every employer would choose to cut loose their employees, so some employers would want to provide insurance, so you want to be sensitive to the price.”
What about that third of the population that doesn’t fall under the caps or receive subsidies? Kimbell said, “I think the thinking is that they can afford to purchase health insurance on the market.” In other words, they’re screwed. It’s the same thinking that was behind Act 60. The same thinking that led to exploding education costs, declining student populations, and stagnating test scores. And, here it comes again for healthcare.