Will Obamacare Spell the End of Employer Insurance?

Fight disinformation: Sign up for the free Mother Jones Daily newsletter and follow the news that matters.


One of the criticisms of Obamacare is that it gives employers a big incentive to drop healthcare coverage. Sure, they’d have to pay a fine, but they’d still save a bundle of money and it’s not like they’d have to worry about their workers going completely without insurance. Employees would just go onto the exchanges and buy subsidized plans there. Sarah Kliff met with Lockton, a Kansas City-based company that consults with mid-sized companies on health insurance benefits, to put some numbers to this:

For the employer, dropping coverage is a pretty decent deal: A company would see its health care costs reduced by over 40 percent. They don’t drop to zero, however, since the employer would still be on the hook for the fines that come along with not offering coverage.

But for the employee, it’s a pretty lousy deal. Lockton ran the numbers, using data on how much employers pay for health insurance now and how much health insurance on the exchanges is projected to cost.They found that employers foot a significantly larger chunk of the insurance bill than the federal government would, even with the new subsidies they’d receive. The firm predicts their premiums would increase anywhere from 79 to 125 percent if they lose employer coverage and have to go to the exchange. There’s such a big variation because exchange subsidies vary by income: Those who earn more are eligible for a larger subsidy.

Here’s my question about this — and it’s a genuine question since I don’t understand the dynamics here too well. It’s fairly common in big companies for executives to have a better healthcare plan than rank-and-file employees. But that’s usually limited to just the very top execs. At the level of director and below, everyone is on the same plan, and that’s because health insurance providers aren’t willing to let companies pick and choose who’s on the group plan. It’s all or nothing. So one of the things that will prevent companies from dropping coverage is that they’d have to drop it for everyone, and that would cause so much uproar in the managerial ranks that they couldn’t get away with it.

There are a couple of reasons why this might not be a big deal:

  • Health insurers, in fact, might be happy to provide policies that cover supervisory personnel and no one else.
  • Or maybe they wouldn’t, but it wouldn’t be that big a deal. Companies would shunt everyone onto the exchanges, but give managers an annual bonus of some kind that would cover (say) 85% of the cost of a gold level plan. Everyone else would have to make do with whatever they could afford through the exchange.

So much of this depends on behavioral predictions that I imagine that there’s really no way to know for sure how it’s going to play out. But if employers do decide to start dropping health coverage en masse, what will that mean? Is it genuinely a bad thing? Or would it be a good deal in the long run, increasing pressure on Congress to hasten the day when we have genuine universal coverage in America? It’s a good question.

LET’S TALK ABOUT OPTIMISM FOR A CHANGE

Democracy and journalism are in crisis mode—and have been for a while. So how about doing something different?

Mother Jones did. We just merged with the Center for Investigative Reporting, bringing the radio show Reveal, the documentary film team CIR Studios, and Mother Jones together as one bigger, bolder investigative journalism nonprofit.

And this is the first time we’re asking you to support the new organization we’re building. In “Less Dreading, More Doing,” we lay it all out for you: why we merged, how we’re stronger together, why we’re optimistic about the work ahead, and why we need to raise the First $500,000 in online donations by June 22.

It won’t be easy. There are many exciting new things to share with you, but spoiler: Wiggle room in our budget is not among them. We can’t afford missing these goals. We need this to be a big one. Falling flat would be utterly devastating right now.

A First $500,000 donation of $500, $50, or $5 would mean the world to us—a signal that you believe in the power of independent investigative reporting like we do. And whether you can pitch in or not, we have a free Strengthen Journalism sticker for you so you can help us spread the word and make the most of this huge moment.

payment methods

LET’S TALK ABOUT OPTIMISM FOR A CHANGE

Democracy and journalism are in crisis mode—and have been for a while. So how about doing something different?

Mother Jones did. We just merged with the Center for Investigative Reporting, bringing the radio show Reveal, the documentary film team CIR Studios, and Mother Jones together as one bigger, bolder investigative journalism nonprofit.

And this is the first time we’re asking you to support the new organization we’re building. In “Less Dreading, More Doing,” we lay it all out for you: why we merged, how we’re stronger together, why we’re optimistic about the work ahead, and why we need to raise the First $500,000 in online donations by June 22.

It won’t be easy. There are many exciting new things to share with you, but spoiler: Wiggle room in our budget is not among them. We can’t afford missing these goals. We need this to be a big one. Falling flat would be utterly devastating right now.

A First $500,000 donation of $500, $50, or $5 would mean the world to us—a signal that you believe in the power of independent investigative reporting like we do. And whether you can pitch in or not, we have a free Strengthen Journalism sticker for you so you can help us spread the word and make the most of this huge moment.

payment methods

We Recommend

Latest

Sign up for our free newsletter

Subscribe to the Mother Jones Daily to have our top stories delivered directly to your inbox.

Get our award-winning magazine

Save big on a full year of investigations, ideas, and insights.

Subscribe

Support our journalism

Help Mother Jones' reporters dig deep with a tax-deductible donation.

Donate