Affordable Health Care?

Sept. 24, 2013
The implementation of the Affordable Care Act will no doubt benefit some, but overall it will be costly and may hurt hundreds of thousands of people. Expect higher taxes, a loss of work hours and a lack of insurance for many.

Americans were told in 2009 that the proposed health care reform would cost around $900 billion over 10 years.  The Congressional Budget Office has done a new analysis now that we are on the cusp of implementation.  Their new estimate is that the cost to taxpayers (my distinction and very different from Americans) will be double what we were told.  Taxpayers will be shelling out $1.8 trillion over 10 years. 

In case you were wondering, some of the increased costs are a function of time.  The $900 billion was the cost from 2010 through 2019, but since the Act was not to take effect until 2014, the reality is that the $900 billion was to cover the last 6 years of that particular 10-year time span.  2010 through 2013 did not accrue costs since the Act was not in effect.  The full cost of an actual 10 years under the Act will cost the $1.8 trillion.  Quite a different picture.

The result is that taxes, or borrowing by the federal government, are going to have to increase to cover the truer cost of the Affordable Care Act.  Higher taxes are one of the megatrends we have been talking to people about as we do our presentations.

Family Glitch

Then there is the reality that the Affordable Care Act could leave up to 500,000 children without coverage and cost some families thousands of dollars.  Former president Bill Clinton highlighted this in a recent speech.  The law was written in such a way that family coverage is at risk.  An employee enrolled in insurance provided by the employer may be unable to get subsidized family coverage through an exchange.  The focal point is the employee, and since the employee has affordable insurance, the family is left to their own devices to purchase coverage for the family.  This may cost the family $10,000 out of pocket for the increased coverage, even if they cannot afford it.  Thus a targeted segment of the population, lower-income families, may be overlooked by the law. 

That’s Got to Hurt

The Act was also intended to help part-time employees secure affordable coverage, and indeed it will help some.  One of the concerns we have had is that the Act may lead to a shift of people from private insurance into the exchanges.  The success of the plan is predicated in keeping most people in private insurance programs.  A large movement to exchanges will change the model as private insurance partially subsidizes the exchange policies.  Some shift to the exchanges has already occurred and more can be anticipated.  Home Depot just announced that it will end medical coverage for some 20,000 part-time employees, sending them instead to government exchanges.  Those employees will have access to insurance, but they run the very real risk of having to go out of pocket in the subsidized pool instead of receiving the insurance from their employer. 

Defunding the Affordable Care Act

One last note on this very large subject.  The House of Representatives voted to defund the Act.  You no doubt saw that in the news.  The reality is that the Senate will never go along with it, and even if they did the President would never sign it.  You may agree with the idea, but don’t get your hopes up.  The Affordable Care Act is going to be implemented on October 1 (exchanges opened), and there is not enough political will to stop it. 

The Act will cost people money through out of pocket expenses, higher premiums, and higher taxes. Employers will be faced with uncertainty, higher premiums, and a disincentive atmosphere when it comes to hiring more people.  Businesses are likely to wait and see what this all means before adding more labor.  These factors will act as a drag on economic growth for 2014.

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