Opinion |

10 comments

Truth about the Affordable Care Act: It’s affordable for no one

by Steve Coomes

When the Patient Protection Affordable Care Act was deemed constitutional in June, many saw it as a promise of free healthcare paid for by employers.

Get real. Please.

Despite the government’s good intentions of hoping to insure the populace, there is nothing affordable about the PPACA. As is usually the case with anything the government gets involved in, it will cost more for all parties involved.

Especially if you’re an hourly worker paying for insurance.

The law of unintended consequences writ large.

If you’re a salaried worker in an industry where there are many hourlies below you (this is primarily the case for restaurants, retail, construction, etc.) expect your insurance to be watered down to a policy that covers less than before and demands a higher deductible.

Why? Because the money set aside for salaried policies will have to be stretched further to cover hourly policies.

Awesome!

I spent much of last week working on a magazine story about the PPACA, dubbed by some as “Obamacare.” Several times during interviews with leaders of large restaurant chains, benefits consultants and lawyers, I was told, in essence, “People who think they’re getting free healthcare are in for a rude awakening. There is nothing free about this.”

PPACA will even be more expensive than what hourly restaurant employees are paying now—if they participate in any insurance plan at all. One 2,600-unit chain leader told me that only 5 percent of the company’s employees use its medical insurance plan, which, to be fair, doesn’t cover a lot, but it’s far better than nothing.

The employee contribution to the plan is $10 a month. No, that’s not a typo: $10; $120 a year. And 95 percent of that chain’s staff won’t pay it. (The company’s contribution is $37 a month per employee.)

According to PPACA guidelines, in 2014, employees of companies with 50 or more full-time equivalent staffers must participate in their company’s insurance plan or seek insurance from a state created exchange. (In an equally constitutional exercise of states’ rights, 17 have declared they will not set up insurance exchanges, which means the federal government will have to create one).

So what will it cost for the low-wage earners the government was seeking to help?

If your annual earnings are more than $14,875 (the poverty line for a single member household), you will pay $130 a month for your insurance at most companies. (Some companies may contribute more to those workers’ plans, but it’s doubtful.)

Again, no typo: $130 a month for a plan that won’t cover much more than the $10 a month plan does now at the aforementioned fast-food chain. (Come 2014, the chain’s contribution is estimated to be about $200, but given that the law still isn’t finalized, the source couldn’t give an exact number.)

Since the story I wrote is destined for publication elsewhere, I can’t quote those sources. But suffice it to say, they said, in essence, “Do you think any employee will pay $130 a month when they won’t pay $10 a month?”

Of course not.

Which leaves these employees in the same fix they’re in now: uninsured and, in many cases, unwilling to do much about it.

Executives at two other chains also said they offered insurance to their rank and file, but no more than 15 percent participated in the plan—and this company employs servers who likely earn two to three times more than the poverty line minimum.

Many say that’s the nature of young people, creatures who don’t get sick often, don’t worry about injuries and don’t fear cancer is coming anytime soon.

Well, sorry for them, but the government says they must participate in an employer plan or they’ll be fined—$100 a year.

That’s right. If you don’t pay the $1,560 a year ($130 x 12 = $1,560) for insurance, you’ll be fined $100.

Wow. What an incentive to play along!

The fine doubles in 2015 and more than doubles again the following year. But even at a penalty of around $600 a year, if workers are too stubborn to get insurance—or unable to set aside around 10 percent of their gross income for it—why would they balk at paying a fine for being non-compliant?

Better yet, as one chain executive asked me, does the IRS really have the means to collect those fines, and what politician will risk being so unpopular as to order their collection?

Three industries that stand to benefit from this mess are benefits consultants—booming right now—lawyers and accountants, people who have a better grasp than most of the 906-page PPACA.

Yet one benefit consultant I talked to sounded like she didn’t even want the work.

Why? Because she sees the PPACA causing real problems for everyone: company HR staffs who have the nightmarish task of administering this program; employees who can’t afford it or won’t buy it; hospitals and physicians who will face the nightmare of billing it; and employers who are looking at paying a minimum of $200 per employee per month to just stay compliant. (If they don’t, they’re fined $2,000 a year per employee, which, if you look at the math, is less than the $2,400 they have to pay. But the drawback is the fine isn’t tax deductible; the insurance is.)

Oh, and the customers of all those companies, too. We’ll have the responsibility of paying increased prices for it all. In the end, someone somewhere has to pay for this. It is not free, and anyone who assumed it would be is living in a fantasy world or below the poverty line.

Recent Stories from Steve
  • Seldomever

    This was all pointed out while the law was being discussed. Some experts said the whole purpose of the law was to make private insurance so onerous that Americans will demand a single-payer system. And, of course, there are a lot of goodies in the law for the Democratic Party base, including requirements for union-only employees in health construction regardless of state laws.

  • Seldomever

    This was all pointed out while the law was being discussed. Some experts said the whole purpose of the law was to make private insurance so onerous that Americans will demand a single-payer system. And, of course, there are a lot of goodies in the law for the Democratic Party base, including requirements for union-only employees in health construction regardless of state laws.

  • Jeremy Mott

    We can agree to disagree about much here, but:

    1. With the obvious ax-grinding here, I would be interested in knowing more specifics about your claim “$130 a month for a plan that won’t cover much more than the $10 a month plan does now”. It may well be the truth…I don’t know. If I were a younger restaurant worker, I might very well be too proud, too lazy, or both to participate in a $10 plan (what might that cover…band-aid applications?). A $130 plan under a regulated (forced competition) insurance market may actually be a huge improvement over a pitiful, throwaway $10 plan offering under current rules. A $120 improvement? Maybe, maybe not. We’ll see.

    2. “Because the money set aside for salaried policies will have to be stretched further to cover hourly policies.”
    Setting aside understandable fears of government interference/inefficiencies, what exactly is wrong with the above? You don’t have to be a commie-socialist to think that a basic benefit such as healthcare shouldn’t be tiered within a company or concentrated only within the ranks of higher paid, salaried people.

    You are right that this does not come free. Customers will end up paying. But the intent (like I said, we’ll have to see about the execution) is something that many feel worth paying for. It’s 2012 in the most advanced, richest country in the world. Healthcare is stuck in the wild west days.

  • Jeremy Mott

    We can agree to disagree about much here, but:

    1. With the obvious ax-grinding here, I would be interested in knowing more specifics about your claim “$130 a month for a plan that won’t cover much more than the $10 a month plan does now”. It may well be the truth…I don’t know. If I were a younger restaurant worker, I might very well be too proud, too lazy, or both to participate in a $10 plan (what might that cover…band-aid applications?). A $130 plan under a regulated (forced competition) insurance market may actually be a huge improvement over a pitiful, throwaway $10 plan offering under current rules. A $120 improvement? Maybe, maybe not. We’ll see.

    2. “Because the money set aside for salaried policies will have to be stretched further to cover hourly policies.”
    Setting aside understandable fears of government interference/inefficiencies, what exactly is wrong with the above? You don’t have to be a commie-socialist to think that a basic benefit such as healthcare shouldn’t be tiered within a company or concentrated only within the ranks of higher paid, salaried people.

    You are right that this does not come free. Customers will end up paying. But the intent (like I said, we’ll have to see about the execution) is something that many feel worth paying for. It’s 2012 in the most advanced, richest country in the world. Healthcare is stuck in the wild west days.

  • Paul T Carney

    So start with insulting generalizations and quickly move to a grossly misrepresented specific to misrepresent the whole? That’s one approach.
    Most of the rest of the plan, especially the parts that talk about what is required in coverage for the money being spent, get left out. Thankfully we’re told up front that the interview samples are incredibly biased themselves, so we’re prepared for what follows.
    The plan actually provides a sliding scale and out-of-pocket maximums for low-income workers (provided they take advantage of the refundable tax credits ). If the employer can’t or won’t pay in to a certain percentage, the exchanges kick in. Credits are available to truly small businesses of fewer than 25 employees.

  • PaulTCarney

    So start with insulting generalizations and quickly move to a grossly misrepresented specific to misrepresent the whole? That’s one approach.
    Most of the rest of the plan, especially the parts that talk about what is required in coverage for the money being spent, get left out. Thankfully we’re told up front that the interview samples are incredibly biased themselves, so we’re prepared for what follows.
    The plan actually provides a sliding scale and out-of-pocket maximums for low-income workers (provided they take advantage of the refundable tax credits ). If the employer can’t or won’t pay in to a certain percentage, the exchanges kick in. Credits are available to truly small businesses of fewer than 25 employees.

  • http://www.facebook.com/profile.php?id=705981775 Curtis Morrison

    You know, it’s not perfect. What was perfect was ‘single payer, everybody in, nobody out,’ but you all didn’t want to be socialists. So we cut in big insurance to compromise and what do we see? More whining.
    Not from those who don’t currently have insurance, mind you. But those who do who are scared to death they may be faced with the reality that we’re all in this together.

  • http://louisvillecourant.com/ curtis morrison

    You know, it’s not perfect. What was perfect was ‘single payer, everybody in, nobody out,’ but you all didn’t want to be socialists. So we cut in big insurance to compromise and what do we see? More whining.
    Not from those who don’t currently have insurance, mind you. But those who do who are scared to death they may be faced with the reality that we’re all in this together.

  • Stephen Coomes

    Just reporting the facts, boys, just reporting the facts. Mark your calendars for 2014 to come back and read this and see if what those professionals told me isn’t right. When you get five different people who’ve never met and who represent five different companies without beneficial overlap–who all are saying the same thing, their claims have credibility. If any of you has more experience in understanding the PPACA than they do, I encourage you to do the research and post a guest blog. If you don’t, but want to do the research, make sure your phone battery is charged and you’ve got a lot of time on your hands.

  • Stephen Coomes

    Just reporting the facts, boys, just reporting the facts. Mark your calendars for 2014 to come back and read this and see if what those professionals told me isn’t right. When you get five different people who’ve never met and who represent five different companies without beneficial overlap–who all are saying the same thing, their claims have credibility. If any of you has more experience in understanding the PPACA than they do, I encourage you to do the research and post a guest blog. If you don’t, but want to do the research, make sure your phone battery is charged and you’ve got a lot of time on your hands.