President Obama couldn’t have been more emphatic. Critics of the Affordable Care Act were predicting it would encourage employers to stop offering health insurance to their workers, forcing them to find new, and possibly more costly, coverage on the Obamacare exchanges. The president had long scoffed at such predictions, and at a White House news conference last April, he sought to put the idea to rest once and for all.
“For the average American out there, for the 85 to 90 percent of Americans who already have health insurance, this thing has already happened,” he said of Obamacare. “And their only impact is that their insurance is stronger, better, more secure than it was before. Full stop. That’s it. They don’t have to worry about anything else.”
Obviously, millions of Americans who purchased health coverage on the individual market did have something to worry about. And now, it’s becoming clear that some who have health coverage through their job should be worried, too.
Recently Target announced it will drop the coverage it offers part-time employees, effective April 1. They will now be required by Obamacare’s individual mandate to find coverage elsewhere.
Target has a lot of part-time employees, but just a few of them — about 10 percent — opted for coverage through the company. Now, they will most likely purchase insurance on the exchanges.
“The launch of health insurance marketplaces provides new options for health care coverage that we believe our part-time team members may prefer,” said Target human resources chief Jodee Kozlak.
Target isn’t alone in making such a decision. Home Depot, Trader Joe’s and others have also dropped coverage for part-time workers. More companies will certainly follow, because Obamacare offers a clear incentive for them to drop such coverage, especially since they can now say they’re actually doing workers a favor by allowing them to buy coverage they “may prefer.”
“This saves the company some money, and to the extent that workers who were getting coverage now get subsidies (which will depend on their incomes and to some extent their ages), they are pushing some of their costs on to the federal taxpayer,” says Yuval Levin, a former Bush administration official and much-read analyst of Obamacare.
Perhaps more importantly, though, Obamacare could be creating a two-tier system inside the employer-based system. Good coverage is still a benefit, and companies will include it as part of the compensation packages it offers the most sought-after workers. But employees lower down the ladder? Not so much.
“The employer offering of health insurance will be more and more tied to attracting high-value workers,” says Bob Laszewski, a respected health care industry expert. “Employers who employ a lot of lower-paid unskilled (like Target) will more often eliminate benefits and send them to the exchanges. Employers who employ a lot of highly skilled and harder-to-recruit workers will more often maintain benefits.”
And that doesn’t mean just part-time employees. Obamacare could affect health coverage for millions of Americans who didn’t think they would be affected.
Until Jan. 1, Laszewski notes, “the only place a company’s workers could get quality, guaranteed issue health insurance at group rates was at the employer.” Companies that canceled coverage were essentially throwing workers out on the street.
That’s no longer the case. “Now, the employer can back away,” says Laszewski. “Particularly for lower-paid workers, the Obamacare subsidies approximate, or even better, a typical employer contribution.”
From a company’s standpoint, what’s not to like? If the company has fewer than 50 employees, it can stop paying for the health coverage of its lower-end workers — actually, of all its workers, if it chooses — and let the taxpayers pick up the tab. Even if the company has more than 50 workers, and can’t find a way out of paying the big-employer penalty for not providing coverage, it can drop coverage, pay the fine, and still likely come out ahead.
But companies might still find that generous coverage is an attractive thing to offer the most sought-after workers. They’ll keep providing coverage to people at the top. Thus the two-tier system.
Of course, that’s not exactly what Obama and his Democratic allies promised when they sold the plan. In fact, they assured the public something like that wouldn’t happen: “Full stop. That’s it. They don’t have to worry about anything else.”
The president’s assurance was uttered long before his you-can-keep-your-coverage promise was exposed as false. Now, Americans know better than to believe what they hear.