Two studies published in the most recent Health Affairs journal raise questions about the contention that the Affordable Care Act will reduce employment, wages, and hours worked by employees.
The study by Gooptu and colleagues examined the effects of the law’s Medicaid expansion on employment and found no statistically significant effect through March 2015. A related study by Moriya and colleagues examined the subsidy structure provided to households getting health insurance through the ACA’s exchanges and similarly found no discernible effect on levels of part-time employment for employees eligible for these subsidies.
These studies provide useful new information, but they do not mean, as some reporting on them seems to suggest, that there is nothing to worry about with respect to the ACA’s effects on labor markets. Given the structure of the ACA, it would be hard to conclude the law would not eventually reduce hours worked or total compensation, although the magnitude of the resulting changes may be hard to detect in the U.S.’s large and complex labor markets.
Last week, the Congressional Budget Office released its latest Budget and Economic Outlook. In this report, CBO notes that the deficit in 2016 is expected to be $544 billion and federal outlays will rise by 6 percent, to $3.9 trillion, compared with 2015. Mandatory spending—such as that for entitlement programs like Social Security, Medicare, and Medicaid—will rise $168 billion this year. Federal spending on major health care programs will account for the largest portion of this rise as federal outlays for Medicare, Medicaid, exchange subsidies, and the Children’s Health Insurance Program (CHIP) will increase $104 billion (11 percent) in 2016.
A reason that might explain why fast-food employees aren’t getting more hours: ObamaCare.
Starting Jan. 1, businesses with 50 or more full-time employees must offer health insurance to all full-time staff or pay a hefty fine. Employers with 100 or more workers had to start offering coverage last year. But smaller businesses that operate on lower margins, especially restaurants, complained loudly about the cost.
And some fast-food franchise owners figured out a way to avoid paying for coverage: Just make as many workers as possible part time. A U.S. Chamber of Commerce survey found nearly 60% of small franchise businesses said they would make personnel changes like this.
“The ones that did it successfully did it three or four years ago,” says Kaya Bromley, an attorney who helps employers comply with the Affordable Care Act. But, Bromley said, some of the restaurant owners who cut hours to sidestep the health law now regret it.
“A lot of the fast-food franchisees that did this,” she said, “are now coming back and saying, ‘It was a great idea for reducing the number of people that I have to offer benefits, but now I can’t run my restaurants.’”
Today the Mercatus Center unveiled a study by Bradley Herring (Johns Hopkins University) and Erin Trish (University of Southern California) finding that the much-discussed health spending slowdown that continued in 2010-13 “can likely be explained by longstanding patterns” over more than two decades, rather than suggesting a recent policy correction. Projecting these factors forward and incorporating the effects of the Affordable Care Act’s health insurance coverage expansion provisions, Herring-Trish predict the expansion will produce a “likely increase in health care spending.”
Though not surprising in light of longstanding appreciation of insurance’s effects on health service utilization, the latter finding is nevertheless profoundly concerning given that pre-ACA health spending growth trends were already widely held to be untenable.
Recently, Democratic presidential candidate Sen. Bernie Sanders released the outline of a plan to move to a single-payer health care system in the U.S. along with proposed tax increases intended to pay for the overhaul. According to the Sanders campaign, the plan would cost roughly an additional $1.4 trillion per year, or $14 trillion over ten years, and it would be financed through a combination of taxes on workers, employers, investors, estates, and high earners.
By CRFB’s rough estimates, Sanders’ proposed offsets would cover only three-quarters of his claimed cost, leaving a $3 trillion shortfall over ten years. Even that discrepancy, though, assumes that the campaign’s estimate of the cost of their single-payer plan is correct. An alternate analysis by respected health economist Kenneth Thorpe of Emory University finds a substantially higher cost, which would leave Sanders’s plan $14 trillion short. The plan would also increase the top tax rate beyond the point where most economists believe it could continue generating more revenue and thus could result in even larger deficits as a result of slowed economic growth.
A new survey from payroll services giant ADP reveals that about 40% of mid-sized and large companies that are offering health coverage to workers aren’t familiar with two new ObamaCare-related forms that must be filed with the Internal Revenue Service starting this tax season.
The ObamaCare “risk adjustment” program was designed to support health plans with lots of sick, expensive customers by giving them money from plans with healthier customers. The goal is to help keep insurance markets stable by sharing the “risk” of sicker people and removing any incentive for plans to avoid individuals who need more medical care. Such stability is likely to encourage competition and keep overall prices lower for consumers, while its absence can undermine both and limit coverage choices—the basic principles of the law.
Yet the way the Obama administration has carried out this strategy shows another unexpected consequence of the 2010 health care law. Critics say the risk adjustment program is having a reverse Robin Hood effect—taking money from some plans that are small, innovative or fast-growing, while handing windfalls to some of the industry’s most entrenched players.
Among ObamaCare’s few popular features, even among Republicans, is the mandate to cover adult children through age 26 on the insurance plans of their parents. Although sold as a gratuity, somebody must ultimately pay. In a working paper, Gopi Shah Goda and Jay Bhattacharya of Stanford and Monica Farid of Harvard find “evidence that employees who were most affected by the mandate, namely employees at large firms, saw wage reductions of approximately $1,200 per year.”
A new National Bureau of Economic Research Working Paper shows that workers with employer-based coverage experienced a yearly reduction in wages of $1,200 because of the mandate to expand coverage to 26-year-old children. The researchers from Stanford and Harvard also found that the wage reduction was not concentrated among those with children on their policies, showing that all workers with employer coverage are paying a price for the ObamaCare mandate.
December’s omnibus budget package contained a measure to delay a provision of the Affordable Care Act by two years is giving finance chiefs some extra time to prepare.
The tax on high-cost employee health plans, or “Cadillac” tax, puts employers on the hook for a 40% levy on any excess cost of health plans above certain thresholds. Even before the delay, many companies and municipalities had already begun to assess whether their plans would trigger additional payments and make preemptive changes to avoid it.