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I always said health care reform would come to the United States, after decades of debating the issue, when private employers decided they could no longer afford the existing health-insurance system. And finally they did, and in 2010 we got the Affordable Care Act.
The question is, for whom is it affordable?
On one hand, the act does provide affordable health insurance for millions of Americans who before were either too poor to purchase any health insurance (and, at least in some states, they’re now eligible for Medicaid) or were forced to purchase private health insurance that was either too expensive and/or covered too little (and they can now purchase better and more affordable health insurance through the government-sponsored exchanges).
On the other hand, Obamacare is going to make it more affordable to drop workers from employer-provided health insurance programs, thus shifting the burden of paying for health insurance from employers to workers. In this, and as Neil Irwin reminds us, it’s not dissimilar from what employers managed to do by eliminating defined-benefits pension plans in favor or defined-contribution plans, and thus shifting the bulk of both the risk and the payments to workers themselves.
One way of looking at this is to examine what employers (at least large corporations) had to do to get access to the workers’ ability to labor. They had to pay a wage (so that workers could purchase the commodities they needed to consume in order to perform labor). On top of that, they had to distribute a portion of their profits to health-insurance companies, so that their workers could have access to health care. In recent years, employers have managed to shift more of the cost of that health insurance to workers (who have faced rising copayments and insurance premia, thus increasing the amount workers pay by 89 percent) but also, with the rising cost of health care, have had to pay out more from their profits to purchase health insurance from their workers (to the tune of an 77-percent increase).
If workers are shifted out of employer-sponsored plans to the health exchanges, employers’ profits are going to increase by a tremendous amount. According to the S&P Capital IQ study Irwin cites, we’re talking about
$700 billion between 2016 and 2025, or about 4 percent of the total value of those companies. The total could reach $3.25 trillion for all companies with more than 50 employees.
Workers, on the other hand, are going to have to pay for health insurance out of their wages, on top of everything else they currently purchase in order to support themselves and their families. Something is going to have to give.
Corporate profits will certainly rise. But how will their employees get by? As workers are forced to pay more and more of their health care, what are they going to have to give up—buying a home, saving for retirement, saving for their children’s college education?
In this sense, the reform that was implemented in 2010 may have made healthcare more affordable for the tiny minority of employers—but less affordable for everyone else.