Obamacare Spells the End of Employer-Based Coverage
Policy + Politics

Obamacare Spells the End of Employer-Based Coverage

REUTERS/The Fiscal Times

That’s what one of the chief architects of the president’s health care law is predicting.

Ezekiel Emanuel, former Obama administration official, says employers will gradually begin to shift their employees onto the public exchanges, despite the White House’s constant insistence that Obamacare will not have a major impact on the employer-based insurance market. Emanuel calls the move an “unintended” but “positive” consequence of the law, The New York Times reports.

In his new book, Reinventing American Health Care, Emanuel explains that a combination of the law’s provisions will likely incentivize larger companies to start pushing their workers onto the federal and state insurance market.

Related: Obamacare Mandate for Companies Under 100 Workers Delayed

Under the law’s delayed “employer mandate,” companies with 50 or more full-time workers are required to provide health care or pay a penalty of $2,000 per employee. However, Emanuel suggests that many large companies that now spend more than that to offer coverage might opt to pay the penalty, raise worker pay and have employees find plans for themselves on the public exchanges.

This could be appealing to some workers, who could potentially qualify for subsidies they otherwise would not have access to with employer-based coverage.

Related: Obamacare Won’t Stop Employers from Providing Insurance

Emanuel also suggests the law’s “Cadillac tax,” which is imposed on high-cost employer-based plans, will incentivize employers to move away from offering coverage. That tax doesn’t take effect until 2018.

He predicts that the shift will start with a few big-name companies. “Then it’s going to be the norm,” Emanuel wrote. “By 2025, few private-sector employers will still be providing health insurance.”

Though most companies say they aren’t expecting to drop their employees’ health benefits in the near future, many are leaving the door open to future changes.

Last fall, the consulting firm Towers Watson released a survey in which 98 percent of employers reported they will keep “active medical plans for 2014 and 2015.” However, the same study found that 92 percent of employers said they would likely change their health insurance options by 2018, when the “Cadillac” tax takes effect.

If Emanuel is correct, this type of systemic shift could represent a huge political problem for Democrats in the future, especially after the backlash President Obama received when people were kicked off their non-compliant insurance policies last year. The political pressure was so intense that the president was eventually driven to issue a rule change allowing insurers to continue offering non-ACA compliant policies, which have since been extended through 2016.

The Obama administration recently made another rule change delaying the employer mandate until after 2016. Many experts and pundits suggested that the move was likely made to put off as many disruptions as possible to the employer-based insurance market ahead of the coming elections.

Avik Roy, a senior fellow at the conservative Manhattan Institute, said the shift would give Republicans another new way to target Obamacare. Roy told the Times that Republicans would argue that the president “had once again expanded the role of government, forced taxpayers to subsidize a growing number of workers 'dumped' onto exchanges and further misled the country to win passage of the law,” in reference to the president’s promise that “if you like your plan you can keep it.”

However, Roy and other health policy experts on both sides say the shift could be a positive move for the entire health care system. “He did lie, and he should be held accountable,” Roy said of the president. But, he added, “It’s a better world where people shop on their own.”

White House advisers argue that large companies will continue to view health coverage as a crucial competitive tool for attracting the best employees.

Top Reads from The Fiscal Times: