Small Businesses Expect to Drop Coverage, See Costs Increase Under Obamacare

“The majority of America’s small employers simply do not believe that the law will accomplish most of what it promised to do”                                                                                                   — NFIB, 7/25/11

The National Federal of Independent Business released a new survey of businesses with 50 employees or fewer, and the results confirm Obamacare’s harmful effects on America’s job-creators.

  • 57% said they were likely to drop coverage if their employees can get a taxpayer subsidy under Obamacare to pay for health insurance.
  • 12% have already lost their current coverage because their insurer has either terminated their health insurance plan or indicated that the current plan won’t be available in the future.
  • 65% believe Obamacare will not slow down the rate of health insurance cost increases.

When small business owners think about what will happen as a result of Obamacare:

  • 77% think the law will increase taxes.

  • 71% think the law will add to federal budget deficits.

  • 65% think the law will infringe on the rights of Americans.

  • Only 19% think the law will reduce paperwork and make providing health care less complex.

  • Only 39% think the law will improve the overall health of the American public.

Obamacare will encourage firms to dump their employees into government-run exchanges, raising the cost of taxpayer-funded insurance subsidies, which is bad enough.

But when America’s job creators expect so many other damaging effects from Obamacare – higher premiums, higher taxes, bigger deficits, fewer liberties – it’s clear that Obamacare is the wrong medicine for a still-troubled American economy.

Survey: More than Half of All Businesses Could Drop Coverage

The small business group NFIB is out with a new survey of its members today, and the results only confirm Obamacare’s ill effects on American job-creators.  The survey of 750 small businesses of under 50 employees found that more than one in ten (11.7%) small businesses have already lost their current coverage – their insurer has either terminated their health insurance plan, or indicated that the firm’s current plan will not be available in the future.

Worse yet, the survey found that many small businesses may follow the guidance of a senior Administration official and look to “dump” their employees on to government-funded Exchanges.  (Remember, the NFIB study surveyed only firms with under 50 employees – i.e., small businesses that would NOT pay the $2,000 per worker penalty for not offering coverage.)  When asked if they would drop coverage “if a substantial share of employees now participating in your health plan became eligible for a significant government subsidy to pay for health insurance,” more than one-quarter of firms now offering coverage (25.9%) said they were very likely to drop, and another 31.5% said they were somewhat likely – for a total of more than 57% of firms who would consider dropping coverage.

Also of note in the NFIB survey are firms’ opinions about Obamacare’s effects on them and their businesses:

Higher Premiums:  Only 2.3% strongly agree that the law will slow the rate of health insurance cost increases, compared to 43.9% who strongly disagree (Of particular note, candidate Obama repeatedly promised that he would CUT premiums in absolute terms by $2,500 per family – yet small business owners don’t even believe the law will slow the growth in premiums.)

Bad for America’s Health:  Only 9.4% strongly agree that the law “will improve the overall health of the American public,” compared to 44.6% who strongly disagree;

Constitutional Infringement:  Nearly two-thirds of firms (64.5%) agree that the law “will infringe on the rights of Americans,” with more than 45% strongly agreeing;

More Paperwork:  A whopping 57.7% strongly disagree that the law “will reduce paperwork and make the provision of health care less complex” – with only a measly 1.8% strongly agreeing;

Higher Deficits:  A majority (52.5%) strongly agree that the law will add to federal budget deficits, with only 2.4% strongly disagreeing;

Government Takeover:  A majority strongly (40.7%) or somewhat (17.0%) believe the law “will lead to a government takeover of health care;”

Higher Taxes:  A majority (55.8%) strongly agree that the law will raise taxes; only 1.5% strongly disagree.

The idea that Obamacare will encourage firms to dump their employees on to government-run Exchanges, raising the cost of taxpayer-funded insurance subsidies, is bad enough. (A Wall Street Journal editorial from this morning on this aspect of the NFIB study can be found here.)  But the fact that, by their own accounts, Obamacare will have so many other ill effects – more paperwork, higher premiums, higher taxes, fewer liberties – on American job creators illustrates exactly why Obamacare is the wrong medicine for a still-troubled American economy.

Do House Democrat Leaders Oppose Obamacare?

This morning’s CongressDaily features an article on the debt limit negotiations, and Democrats’ adamant insistence that any agreement include job-crushing taxes.  The article quoted House Democrat Caucus Chairman John Larson as saying that “the only way ‘conceivably to get Democratic support’ on Medicare cuts was to direct any savings back into the Medicare program, in addition to increasing government revenues.”

This comment was a curious statement to make, as non-partisan budget analysts and even President Obama himself have admitted that the health care law uses more than $500 billion in Medicare funds to pay for new entitlements:

  • Medicare actuary Foster has written that the Medicare provisions in Obamacare “cannot be simultaneously used to finance other Federal outlays (such as the coverage expansions under the PPACA) and to extend the [Medicare] trust fund, despite the appearance of this result from the respective accounting conventions.”
  • The Congressional Budget Office agreed with the Medicare actuary, writing that the Medicare provisions in Obamacare “would not enhance the ability of the government to pay for future Medicare benefits.”
  • President Obama in an interview with Fox News last year admitted that “You can’t say that you are saving on Medicare and then spending the money twice.”

Last year then-Speaker Pelosi famously said we had to pass the bill to find out what’s in it.  Some might suggest Democrats need to take her  advice, to rediscover how Obamacare uses more than half a trillion dollars in Medicare savings – not to improve Medicare’s fiscal situation, but to create new and unsustainable entitlements.

Yet More Evidence Obamacare Is Costing Jobs

The Heritage Foundation is out this week with a new study quantifying Obamacare’s adverse impact on job creation.  The study notes that in the months prior to April 2010, private sector firms created more than 67,000 jobs per month.  After April 2010 – the month after the President signed Obamacare into law – private sector job creation plummeted to only 6,400 jobs per month, or less than one-tenth the prior pace.  This growth of 6,400 private sector jobs per month is MUCH less than the 100,000-150,000 jobs the economy needs to generate per month just to keep up with population growth.  And this lethargic pace of private sector job creation is also a far cry from the “4 million jobs – 400,000 jobs almost immediately” that former Speaker Pelosi said Obamacare would generate back in February 2010.

Separately, Bernie Marcus, the co-founder of Home Depot, provided further anecdotal support for Heritage’s findings in an interview with Investors Business Daily yesterday.  Marcus believes the federal government is the biggest obstacle to job creation, because “the impediments that the government imposes are impossible to deal with.”  Chief on that list are new mandates imposed thanks to the President’s health care overhaul:  “As [President Obama] speaks about cutting out regulations, they are now producing thousands of pages of new ones.  With just ObamaCare by itself, you have a 2,000 page bill that’s probably going [to] end up being 150,000 pages of regulations.”

With unemployment remaining near record high levels and the economy plagued by moribund growth, these new developments reiterate what many Republicans predicted all along – Obamacare is costing the American economy jobs.

Oops: Yet Another Obamacare Glitch “May Leave Families with High Insurance Costs”

The Hill reports this afternoon on yet another “glitch” found in the 2,700 page Obamacare statute.  The issue involves the “firewall” designed to encourage employers to continue offering coverage.  Under the law, individuals can obtain subsidized coverage if their employer plan is “unaffordable,” meaning it costs more than 9.5% of their income.  But Congressional scorekeepers, when analyzing the bill before it passed last year, “took the law to mean that employers and their families aren’t eligible for subsidies as long as the individual plan is affordable – regardless of the price of the family plan.”  In other words, a family plan could cost 20% of a worker’s income – yet that employee and his family would NOT be eligible for insurance subsidies, so long as the plan covering the worker himself cost no more than 9.5% of the worker’s income.

Liberal advocates have noted the dilemma that this provision, coupled with Obamacare’s unprecedented individual mandate, creates:

If you’ve got employer-based coverage that’s affordable for the employee only…the family is expected to take the employer coverage even if it’s totally unaffordable and no one in the family is eligible for the exchange subsidies….If they don’t fix this – and by they I mean either the administration or Congress – we’re going to have middle-class families extremely unhappy with health reform in 2014, because they’ll basically be facing financial penalties for not buying coverage when they don’t have access to any affordable options.

There are two options this technical “glitch” creates.  Under one scenario, individuals will be FORCED to buy employer-provided health coverage even though “they don’t have access to any affordable options.”  Alternatively, the confusion regarding this provision could lead businesses to drop their coverage altogether – in which case ALL their employees would be eligible for taxpayer-funded subsidies, without going through the convoluted “firewall” tests outlined above.  That however would obviously raise the costs of Obamacare’s insurance subsidies, potentially by trillions of dollars.

Last March, Speaker Pelosi famously said we had to pass the bill to find out what’s in it.  Now that yet another “glitch” in Obamacare has become known, we find that families will be forced – under pain of financial penalties – to buy coverage they cannot afford.

CBO: “Free” Health Care Raises Premiums by Nearly 10 Percent

Over and above the controversies surrounding the Institute of Medicine report on women’s health coverage – the Administration’s admission back in February that it had already decided to mandate coverage of contraceptive services; the idea that contraceptive coverage can “prevent” medical “ailments” – there’s one word running through many of the stories published this morning on the IOM study: “free.”  While it’s a catchy word for headline writers to use – “WOMEN SHOULD GET FREE BIRTH CONTROL, PANEL SAYS” – it’s also completely WRONG.  Even some of the articles (eventually) admit that: “Although the services will be free of any additional charge to patients, somebody has to pay.  The cost is likely to be spread among other people with health insurance, resulting in slightly higher premiums.”  It is however curious that the fact that someone has to pay for all this care got buried in the coverage, while the “free” moniker was thrown about in the headline or lead paragraphs.

There is a bigger point here, as the Congressional Budget Office recognized when it analyzed premium increases under Obamacare in November 2009.  CBO noted that the richer benefit packages proposed under Obamacare would raise individual insurance premiums by up to 30 percent – not just because of the cost of services themselves, but because reducing cost-sharing leads to increased demand:

…The increases in actuarial value would also reduce enrollees’ expected out-of-pocket spending on copayments and deductibles, particularly for enrollees who used more medical services than average.  The reduced cost sharing would lead to greater use of medical services, which would tend to push premiums up further.

CBO went further, quantifying the premium impact of this reduced cost-sharing:

Because of the greater actuarial value and broader scope of benefits that would be covered by new nongroup policies sold under the legislation, the average premium per person for those policies would be an estimated 27 percent to 30 percent higher than the average premium for nongroup policies under current law (with other factors held constant).  The increase in actuarial value would push the average premium per person about 18 percent to 21 percent above its level under current law, before the increase in enrollees’ use of medical care resulting from lower cost sharing is considered; that induced increase, along with the greater scope of benefits, would account for the remainder of the overall difference.

CBO predicts individual health insurance premiums will rise by an estimated 9 percent (the difference between 18-21 percent and 27-30 percent) solely because more services are being provided with smaller, or no, cost-sharingSo the non-partisan CBO believes that “free” care will raise premiums by nearly 10 percent.  Somehow that story didn’t get mentioned in all the discussions about the IOM recommending “free” contraceptive coverage.

“We Told You So” on Contraception Mandate

Summary documents of the Institute of Medicine’s report on female preventive services were released today.  (The full report won’t be released until tomorrow morning.)  The recommendations include one suggesting that HHS should require coverage, without cost-sharing, of “the full range of FDA-approved contraceptive methods, sterilization procedures, and patient education and counseling for all women with reproductive capacity.”

However, as my missive from February notes, the New York Times reported at that time that the Administration already knew contraceptive services would be covered before the IOM report was even announced:

Administration officials said they expected the list [of required benefits] to include contraception and family planning because a large body of scientific evidence showed the effectiveness of those services.  But the officials said they preferred to have the panel of independent experts make the initial recommendations so the public would see them as based on science, not politics.

So the Administration told the New York Times in February that contraceptive services would be covered – and that the IOM study was being used solely to provide political cover to the Administration for a decision that had already been made.  And – surprise, surprise! – July’s IOM report did just that.  Like I said, “We Told You So…”

The other issue with the IOM’s recommendations is the way in which these new benefit mandates will raise premiums.  The expansive nature of the mandates (e.g., “the full range” of contraceptive methods), and the fact that some of the mandates (e.g., “comprehensive lactation support and counseling”) may not be covered currently means they will raise premium costs for businesses – and ultimately for all Americans.  Candidate Obama promised to cut premiums by $2,500 for the average American family – and the new benefit mandates proposed today will only undermine that promise still further.

Obama Throws Good Money After Bad

Taxpayer-funded PR for Unsustainable CLASS Act


“We very much share the concerns that have been expressed that, as written into the law, the framework of the program was not sustainable.”

Secretary Sebelius, 2/16/11


At a time when the federal government is running trillion-dollar deficits, the Obama Administration has proposed spending yet more taxpayer dollars to launch a PR campaign aimed at promoting the CLASS Act—a new Obamacare entitlement that even Secretary Sebelius admits is at risk of becoming “immediately insolvent.”

  • Non-partisan experts and actuaries have consistently warned that the program could become unsustainable without a massive taxpayer bailout.
  • The independent Medicare actuary concluded that there is a “very serious risk” of the CLASS program becoming unsustainable, and the President’s own Fiscal Commission recommended that the “financially unsound” program be significantly reformed or repealed entirely.
  • Senate Budget Committee Chairman Kent Conrad famously called the program “a Ponzi scheme of the first order, the kind of thing Bernie Madoff would have been proud of.”
  • Senators Shelby and Thune wrote last week to Secretary Sebelius to express concern that the Administration plans to “use federal resources on television ads in an effort to mislead Americans that the CLASS Act is fiscally sound.”

The Administration has provided no details about how it believes it can turn a totally unsustainable entitlement into a solvent program, yet it already has plans to spend more taxpayer funds for a PR campaign to promote the program. It’s just another sign that Obamacare will prove to be a budget-buster for the federal government.

Yet Another Way Obamacare Will Raise Premiums

A week after the release of Obamacare’s Exchange regulations, states are still looking through the nearly 350 pages of Washington requirements to analyze how the various federal mandates will impact their insurance markets.  Because ALL components of the insurance market reform regulations – including provisions regarding eligibility determinations and insurance subsidies – are not public yet, it’s difficult to assess exactly how bad Obamacare will be.  But one provision in particular included in the Exchange regulation seems ripe for abuse – and could raise health insurance premiums considerably.

At issue is the large number of “special enrollment periods” outside of the annual open enrollment season under which individuals can sign up for plans and subsidies.  These special enrollment periods will encourage healthy individuals to wait until they become sick and need coverage to buy it, raising premiums for everyone else.  For instance:

  • An individual can obtain coverage when he “is determined newly eligible or newly ineligible for” insurance subsidies.  Under this provision, a voluntarily uninsured worker in a family of four making $90,000 a year could request a $5,000 pay cut upon a cancer diagnosis, and become immediately eligible for taxpayer-subsidized coverage (because the family’s income would fall under 400% of federal poverty, making the family eligible for subsidies).
  • An individual can also obtain coverage when he “has a change in eligibility for cost-sharing reductions, regardless of whether such individual is already enrolled in a QHP [qualified health plan].”  Under this circumstance, an uninsured worker making 260% of poverty could, upon receiving an adverse medical diagnosis, ask for his pay to be cut to under 250% of poverty – because that change in cost-sharing status would make him immediately eligible for government insurance subsidies.
  • An individual can obtain coverage when that individual “gains access to new QHPs as a result of a permanent move.”  Here, individuals could easily game the system by moving from Philadelphia, PA across the Delaware River to Camden, NJ; that move would change their choice of plans, thus triggering a “special enrollment period.”  Anecdotal evidence suggests that some individuals may already be “moving” by utilizing mailing addresses in other nearby jurisdictions to obtain lower premiums; it’s possible to envision a scenario whereby an individual in Washington, DC could use a friend’s mailing address to “move” to Arlington, VA, and thus become immediately eligible for coverage and subsidies.
  • “An Indian…may enroll in a QHP or change from one QHP to another 1 time per month.”  While this exemption is due to interactions with the Indian Health Service, it again gives Indians a strong disincentive to obtain coverage until they need it – because they know insurance will be available to them at any point in time.

This potential for abuse is exacerbated by a provision in proposed rule specifying that under special enrollment periods, individuals can “enroll in or change from one QHP to another.”  In other words, individuals can “buy up” from a Bronze plan to a Gold or Platinum plan during a special enrollment period.  This provision not only gives individuals an incentive to “game” the system to obtain coverage, it also encourages them to “game” the system to obtain richer coverage at periods when they know they will have high health expenses.

Unfortunately, these examples are far from abstract.  Data from multiple insurance companies suggest that, where an individual mandate has already been enacted, people will pay the penalty associated with the mandate while healthy, only to obtain coverage and run up high health costs once becoming sick – placing more upward pressure on insurance premiums.

Candidate Obama promised to cut premiums by $2,500 for the average American family.  But the draft Exchange regulation, by giving individuals a strong disincentive to buy coverage until they need it, will only lead to another upward premium spiral.

Update: 8,700 Pages of Obamacare Regulations

Over the past few weeks, several folks have asked for an updated count of the number of pages of regulations the Administration has released.  Through today, that count totals 8,700 pages of rules and Federal Register notices related to Obamacare.  That’s an increase of more than 2,100 pages since the one-year anniversary in March.  And it doesn’t even include regulations not yet formally published in the Federal Register, like the massive Medicare physician fee schedule and the co-op regulations released in draft form this morning.

And of course, it’s not just paper that’s the problem – it’s the bureaucracy and confusion as well.  As we’ve previously documented, the law creates 159 new bureaucracies, boards, and programs – which will produce more mandates for businesses to follow, and intrude on Americans’ personal relationships with their physicians.  Just diagramming how the measure “works” has proved a nightmare, whether it comes to the whole law, or even a portion of it (like the bureaucratic hoops small businesses must go through to obtain tax credits).

At a time when our nation faces continued sluggish growth and record unemployment, it’s unfortunate that the damaging regulations and mandates released by the Administration to implement Obamacare will harm the American economy and job-creating businesses.