We Told You So: Nation’s Largest Employer Scales Back Health Coverage

Over the weekend, more details emerged about how Obamacare is transforming the American workforce – and not for the better.  The New York Times reported on many small firms not hiring new workers, or scaling back hours for existing workers, to avoid the law’s new taxes.  And the Huffington Post reported that Wal-Mart has changed its employment policy, eliminating health insurance benefits for new part-time workers – thereby dumping them on to Obamacare’s exchanges:

Walmart, the nation’s largest private employer, plans to begin denying health insurance to newly hired employees who work fewer than 30 hours a week, according to a copy of the company’s policy obtained by The Huffington Post.  Under the policy, slated to take effect in January, Walmart also reserves the right to eliminate health care coverage for certain workers if their average workweek dips below 30 hours.…

Labor and health care experts portrayed Walmart’s decision to exclude workers from its medical plans as an attempt to limit costs while taking advantage of the national health care reform known as Obamacare….“Walmart is effectively shifting the costs of paying for its employees onto the federal government with this new plan, which is one of the problems with the way the law is structured,” said Ken Jacobs, chairman of the Labor Research Center at the University of California, Berkeley.

“Walmart likely thought it didn’t need to offer this part-time coverage anymore with Obamacare,” said Nelson Lichtenstein, director of the Center for the Study of Work, Labor and Democracy at the University of California, Santa Barbara.  “This is another example of a tremendous government subsidy to Walmart via its workers.”

In pursuing lower health care costs, Walmart is following the same course as many other large employers. But given its unrivaled scale, Walmart’s policies tend to influence American working conditions more broadly.  Tom Billet, a senior consultant at Towers Watson, a professional services firm that works with large companies to develop benefit plans, said other companies are also crafting policies that will exclude some part-time workers from medical coverage.  Billet portrayed the growing corporate interest in separating out part-time workers as a reaction to another aspect of Obamacare – the new rules that require companies with at least 50 full-time workers to offer health coverage to all employees who work 30 or more hours a week or pay penalties.

One major bottom-line question in this development relates to how many more people will be added to government health rolls by this apparent trend.  In last month’s job data, the Bureau of Labor Statistics estimated nearly 28 million Americans work part-time – defined by the BLS as fewer than 35 hours per week.  Using Obamacare’s less stringent 30 hours per week standard would reduce that 28 million number somewhat – and many part-time workers do not have access to employer-provided health insurance currently.  (Of firms offering insurance to their employees, 28% extend that offer to part-time workers as well – a fact which only indirectly illuminates the number of part-time workers receiving insurance coverage from their employer.)

All that said, the point remains that millions – and perhaps tens of millions – of part-time workers who currently receive insurance from their employers could lose it due to Obamacare – and federal taxpayers will be stuck paying the bill.  That’s not “reform,” and it’s not a change millions of American workers, to say nothing of American taxpayers, can believe in.

Ebenezer Obama’s “Scrooge Christmas”

On Friday, President Obama said that going over the “fiscal cliff” would result in a “Scrooge Christmas” for millions of struggling middle-class families.  The President is right that raising taxes on anyone would put a “Bah, humbug!” into Americans’ holiday spirit.  But we like to think that, after calling other politicians names, President Obama received a visit by the following three spirits:

Ghost of Christmas Past:  President Obama signs SCHIP legislation, including his first – but not his last – tax increase on the middle class.  Old Fezziwig complains that Obama unfairly broke his “firm pledge” to the middle class not to raise “any of your taxes.”

Ghost of Christmas Present:  President Obama’s latest tax increases in Obamacare take effect on January 1, raising taxes on millions of middle-class families who buy health insurance, participate in flexible spending arrangements, or use medical devices.  As a result, the Cratchits can’t afford to buy Tiny Tim a new crutch, due to the medical device tax used to fund Obamacare.

Ghost of Christmas Future:  Obamacare’s other taxes slowly kick in, including the 40 percent tax on health benefits – because Obamacare forces people to buy health insurance so that the government can tax it.  That doesn’t even count the new taxes that have yet to be enacted.  Both the non-partisan Medicare actuary and Congressional Budget Office agree that Obamacare is unsustainable as written – meaning even more tax hikes are on the way.  And the grave seen at the end of our tale isn’t Ebenezer’s – it’s that of the American taxpayer, worked to death to pay for Obamacare’s crushing fiscal burdens.

But as Dickens taught us more than a century ago, there is always time to repent, seek forgiveness, and change course.  The question now is, will Ebenezer Obama listen to the lesson these three spirits have provided, and stop raiding the middle class to pay for unsustainable new entitlements?

Washington Post Front Page: AARP Lobbies Against Medicare Changes That Could Hurt Its Bottom Line

A front-page story in tomorrow’s Washington Post talks about AARP’s financial conflicts of interest in the ongoing fiscal cliff debate.  The article references Sen. DeMint’s report into AARP’s business practices, including the report’s conclusion that Medigap reform could cost AARP $1.8 billion in “royalty fees” over the next ten years.  The article also includes some interesting new nuggets regarding AARP’s business practices:

  1. Former AARP executives admitted to the Post that the organization’s business model – in which AARP receives a percentage of every Medigap premium dollar paid by seniors – presents a financial conflict-of-interest, by giving AARP an incentive to keep premiums high.  Former AARP executive Marilyn Moon said: “There is a potential conflict of interest….Any way you look at changes in Medigap that people are talking about, I think it’s good for beneficiaries, and anybody who is opposing that who claims they are looking out for beneficiaries, you have to wonder why.”  And former AARP CEO Bill Novelli made a similar admission: “It’s fair to say that AARP does have a financial interest in Medigap insurance because it’s a significant revenue-raiser for them.  If Medigap were somehow reduced, then AARP would have a financial reduction.”
  2. AARP executives personally profit based on how much “royalty fee” revenue the organization generates.  According to the article:

AARP executives have a personal financial incentive to boost the group’s revenue because annual bonuses for employees are determined in part by AARP’s “gross revenues,” according to federal tax records.  They show, for example, that [CEO Barry] Rand received $140,156 in “bonus and incentive compensation” last year, about 15 percent of his total compensation of $938,553.  AARP officials said that revenue accounts for only about 5 percent of the bonus calculation and that other factors, such as serving members and promoting social change, are far more important.  A person familiar with the group’s operations said the percentage was higher in the recent past.  “Revenues are very important.  You have to make your numbers,” said the person, who spoke on the condition of anonymity to discuss internal matters.”

  1. AARP finally admitted publicly it lobbies on Medigap issues for which it has a financial conflict-of-interest, as noted above.  Two years after a senior AARP official told CNN the organization did not lobby on Medigap “at all,” the organization finally admitted to the Post that it HAS been lobbying against Medigap changes that could cost it financially.  Now it claims that Medigap “is not and was not a lobbying priority,” and that “there were no phone calls, e-mails, or robo-calls generated on Medigap proposals” – not yet anyway.  Finally, as the Post article notes, in writing about Medigap to the supercommittee last year, CEO Barry Rand “did not mention AARP’s dominant role in the Medigap market,” and the financial conflicts inherent in AARP’s business arrangements.

Mr. President, Where’s #My2500?

As part of its continued efforts on the fiscal cliff, Campaigner-in-Chief Obama and the White House started a new #My2K hashtag on Twitter, to promote its plan to raise taxes on small businesses. (Some may find it slightly ironic that the President thinks middle-income families’ tax cut is their money, while small businesses’ tax cut is his money to play with.)

But that got us wondering: Where’s #My2500 – Obamacare’s promised reduction in health insurance premiums?  As a reminder, candidate Obama promised repeatedly that his health plan would CUT premiums by an average of $2,500 per family within Obama’s first term.  But as the below graph shows, while candidate Obama promised premiums would fall by $2,500 on average, premiums have risen by $3,065 since Barack Obama was elected President.

So maybe, just maybe, instead of running around holding campaign-style rallies in an attempt to raise taxes on job creators, President Obama could get to work on fulfilling his campaign pledge, and bringing us #My2500.

Obamacare’s Tax on Charity

Amidst the debate over tax policy associated with the fiscal cliff, the Washington Post ran a column yesterday calling the deduction for charitable contributions “indispensable,” because it encourages private giving, “an economic benefit we can’t afford to mess with.”

Problem is, Obamacare already DID mess with the charitable deduction – because for “high-income” individuals, charitable contributions will be taxed, beginning January 1.  Per Section 1402 of the reconciliation bill amending Obamacare, the law’s new 3.8% tax on “high-income” individuals is assessed on filers’ adjusted gross income – that’s income BEFORE deductions like those for charitable contributions are taken into account.  Individuals subject to the 3.8% tax will pay the tax on all income they receive, regardless of whether or not they donate that income to charity.  For instance, a lottery winner who wanted to donate half of his $500,000 winnings to charity would pay $9,500 ($250,000 times 3.8%) for the “privilege” of doing so.

What’s worse, this tax will hit more and more individuals over time – because the “high-income” thresholds are not indexed for inflation.  The Medicare actuary has predicted that the tax will hit only 3 percent of filers when it goes into effect next year, but nearly 80 percent of filers in the long term.

So rather than encouraging charitable contributions, Obamacare actively works to discourage them – perhaps because liberals can’t stand the thought of entities other than government engaging in service for the public good.  It’s enough to put a “Bah, humbug!” into anyone’s holiday spirit.

Up Next: Obamacare’s Thanksgiving Turkey

According to online sources, on Wednesday President Obama plans to pardon the White House turkey in an annual Thanksgiving ceremony.  But before that happens, later today Secretary Sebelius plans to serve the American people a turkey – more regulations implementing Obamacare.  Among the possible items on “Aunt Kathy’s” Thanksgiving menu:

Reading through all these mandates and requirements is enough to give anyone a serious case of indigestion, which explains why the Administration is releasing them so close to Thanksgiving.  They don’t want the American people to read the regulations implementing the bill, just like they didn’t want the American people to read the bill itself.  Thus the spectacle of a Cabinet secretary who sat idly by as an “author” of Obamacare admitted he hadn’t read it (because Democrats had to “make judgments very fast”) engaging in a real-life version of “Take Out the Trash Day” by dumping out massive – and costly – regulations two weeks after the election, and two days before a major holiday.  It does raise one obvious question: If Obamacare is so popular, why did these major regulations implementing Obamacare sit on a shelf until after the election?  What has HHS been hiding?

Then-Speaker Pelosi spoke the truth when she famously said we had to pass the bill to find out what’s in it.  That statement is just as true with the regulations implementing the bill as it is with the 2700-page measure itself.  But a general clue about what’s to come will arrive in the form of the entrée on many Americans’ tables this Thursday.

“The Law of the Land” Is One Big Mess

Last week, many press stories focused on Obamacare’s status as “the law of the land,” attempting to emphasize that the 2700-page measure is “here to stay.”  But based on a sampling of recent quotes, what President Obama wants “to stay” in his second term is a jumbled-up mess of bureaucratic and regulatory chaos and confusion:

  • State exchanges are “not going to be ready;”
  • “If I could wave a magic wand and change [the start] from 2014 to 2015, I would….[Meeting the law’s deadlines] is going to be really hard;”
  • “The timeline is definitely getting crunched.”

And those quotes are comments from three different supporters of the law – individuals and groups working on Obamacare’s implementation.  These sample quotes come from but one article among many outlining the federal government’s many difficulties in implementing the law – illustrating perfectly its unworkable, Rube Goldberg-esque nature.

Late yesterday, HHS announced yet another implementation delay, allowing states an extra month to decide whether or not to establish a state-based Exchange.  But with even supporters of the law publicly admitting that the complex, bureaucratic measure is not ready for prime time, why would states want to accept political responsibility for Washington’s chaos by creating their own Exchanges – thereby going down with a sinking ship?

The Siren Song of the Left’s “Competition”

As previously noted, yesterday the Center for American Progress released its platform for altering entitlements.  In fairness, the paper does include some conservative ideas, most notably additional means-testing for Medicare beneficiaries.  But mainly the report demonstrates the fundamental difference between conservatives and liberals: Not only do liberals not believe in markets, they don’t understand (and/or don’t want to understand) how markets actually work.

Take for instance the CAP proposals that will supposedly “enhance competition based on price and quality,” such as the idea to “require health insurance exchanges to offer tiered insurance plans.”  On the face of it, the idea sounds reasonable enough – encourage plans to lower premiums by offering a variety of choices.  But the catch here – as in the rest of the CAP proposals – is that “competition” is government-defined, government-mandated, and government-prescribed.  For instance, if insurers want to offer, and patients want to purchase, less expensive insurance coverage that doesn’t cover all of Obamacare’s mandated benefits – and/or insurance purchased across state lines – both CAP and Obamacare would tax those who gain coverage through such means, because this “competition” is prohibited in liberals’ new health care utopia.

Then there’s the fact that the CAP report also includes numerous other proposals that involve expanding prescription drug price controls in various forms.  One may find it ironic – and ever-so-slightly contradictory – that a report supposedly focused on “enhanc[ing] competition” simultaneously expands government-dictated price controls.

Finally, CAP’s proposals for “competitive bidding” seem little short of comical for their ideologically-based hypocrisy.  The paper states that Congress should “use competitive bidding for Medicare Advantage” – but then just as quickly states that government-run Medicare itself should not compete.   And why doesn’t CAP want government-run Medicare to compete against private plans?  Because a paper co-authored by one of CAP’s own scholars released in September found that in many parts of the country, traditional Medicare can’t compete – it’s far too costly.  The study, outlined in an article in the Journal of the American Medical Association, found that private plans would be 9% cheaper than traditional Medicare under a competitive bidding proposal.

Mind you, the Left has no problems forcing seniors to pay more for private Medicare Advantage coverage, or forcing them out of their plans entirely – Obamacare’s cuts to the program will ensure both outcomes.  But when it comes to competitive bidding for government-run Medicare itself, CAP and others on the Left want nothing to do with such an idea, clinging instead to the shibboleth of government-run Medicare as a first step towards socialized medicine for all.  And that hypocrisy – competition for thee, but not for me – explains in a nutshell why liberal ideas such as those in the CAP paper are both unrealistic and ideologically dangerous.

News on Containing Costs Goes from Bad to Worse

The employer benefits firm Mercer released its annual survey of health plans today, and for those wishing to “bend the curve” on health costs, the results were not promising.  Mercer’s survey concluded that employers’ health costs will rise 4.1% this year, and even more (5.0%) next year; if firms do not take steps (e.g., raising co-payments, etc.) to control spending, costs would rise by a whopping 7.4% in 2013.  Recall that four years ago, candidate Obama promised repeatedly that his health plan would CUT premiums by an average of $2,500 per family.  Not only has that premium reduction not happened – premiums have risen by $3,065 since Barack Obama was elected President – but cost increases continue to grow unabated.

In fact, today’s Mercer study suggests one way Obamacare will accelerate the growth of health costs – by limiting usage of consumer-driven health plans.  The survey notes that an “enrollment shift” to consumer-driven plans – which have more than tripled in popularity since 2007 – has “helped to hold down overall cost increase[s].”  Consumer-driven plans help to slow cost growth because average costs are nearly $2,200 lower per year than traditional health insurance costs.  Unfortunately, several provisions in Obamacare will move health coverage in the exact opposite direction, by restricting access to HSAs and consumer-driven plans – therefore raising, not lowering, health costs.  Three separate provisions in the statute, and regulations implementing the law, will reduce access to HSA plans:

  1. Obamacare’s essential health benefits package contains new restrictions on deductibles and cost-sharing, which will prevent at least some current HSA plans from being offered.
  2. Obamacare’s medical loss ratio regulations also impose new restrictions that studies show will hit HSA plans particularly hard, and could force individuals to change their current form of coverage.
  3. The Obamacare statute does not specify that cash contributions made to an HSA will be counted towards the new federal actuarial value standards.  And a February bulletin released by HHS in advance of upcoming rulemaking indicates that under the Administration’s approach, not all contributions into an HSA will count towards the new minimum federal standards – meaning some HSA policies will not be considered “government-approved.”

Both individually and collectively, these provisions in Obamacare will have the effect of limiting access to new and innovative consumer-directed health plans like Health Savings Accounts.  Not only will these onerous regulations prevent many Americans from keeping the plans they have and like – by limiting access to consumer-directed health plans, Obamacare will also raise, not lower, health costs for many Americans.

No Magic Bullet to Control Entitlements

Speaking at an event this morning regarding the Center for American Progress’ new health and entitlement manifesto (about which more later), former Obama Administration official Zeke Emanuel claimed that controlling health costs by itself would cure America’s fiscal woes: “I think this is the legacy for the president because if he can get healthcare costs under control, everything changes….This really is the big kahuna for his legacy going forward.”

It’s a nice assertion – but it’s also flat wrong.  The Congressional Budget Office’s long-term budget outlook includes a chart (attached below) demonstrating that, over the next 25 years, demographics count for at least half – and as much as three-quarters – of projected increases in spending on Medicare, Medicaid, Social Security, and Obamacare insurance subsidies:

What this analysis means is that, even if the growth of health costs does manage to slow (both CBO and the Medicare actuary think Obamacare’s cost reductions will not be sustainable in the long-term), slowing health costs alone won’t solve Medicare’s financial problems.  Put another way, Medicare needs structural reform NOW – because nothing else can save the program.  Emanuel’s incorrect comments notwithstanding, it’s a lesson policy-makers in both parties would be wise to heed.