Despite the sticker shock many Americans are experiencing after thinking the Affordable Care Act (ACA) would lead to affordable health insurance, most of the law’s unintended consequences were predictable and therefore avoidable.
Sky-high premiums, cost-prohibitive deductibles, and the exodus of giant insurance companies from the Obamacare exchanges after losing hundreds of millions of dollars in the individual marketplace have become easy—and legitimate—targets for prognosticators now saying I told you so.
Less discussed but equally pernicious for many Americans are the unintended consequences of the ACA’s employer and individual mandates, which lawmakers ought to replace with policies that empower employers and patients.
The consequences of the ACA mandates are not like the bizarre side effects spun off of treating a patient’s main ailment with an edgy new medication. The ACA is not a pill that keeps you from balding only to give you the runs. Instead, the mandates directly undermine their main purpose, thereby working against many of the employees and individuals the law’s proponents claim they want to help.
The ACA’s employer mandate gave business owners a financial incentive to keep their number of full-time employees below 50. The mandate requires businesses with 50 or more full-time employees to provide those employees with health insurance. Moreover, the law considers any employee working at least 30 hours per week or 130 per month as full-time, departing from the traditional 40-hour threshold.
As a result, the ACA gave business owners an irresistible two-pronged incentive—because the alternative is often unaffordable—to offer their employees fewer hours, or to employ fewer workers than they might have. By laying off, cutting the hours of, or refusing to hire additional full-time employees, financially savvy business owners can avoid tripping the mandate’s expensive wire.
The mandate has left some employers counting the cost of staying in business at all, according to Dawn Sweeney, president and CEO of the National Restaurant Association, and Katherine Lugar, president and CEO of the American Hotel and Lodging Association, writing for The Hill in 2015.
“After weeks of number crunching, I have found that complying with ACA under a 40-hour full-time employee threshold is possible, but 30-hours per week would involve a major reworking of my business model or even rethinking of staying in the business altogether,” Steve Palmer, owner of Palmer Place Restaurant & Biergarten in La Grange, Illinois, told Sweeny and Luger.
“A $250 to $300 monthly hike per employee really increases the cost of a pizza or a banquet for my customers,” Mike Rastrelli, owner of Rastrelli’s restaurant in Clinton, Iowa, told Sweeny and Luger. “The unfortunate alternative is to trim hours. Full-time employees will become a financial liability, as do part-time employees who work too many hours. And anyone who wants to pick up an extra shift or make some extra cash? That will soon be a thing of the past.”
After edging employees out of potentially full-time work with the employer mandate, the ACA then requires these people to purchase health insurance in the individual marketplace—or pay a fine. Under the law’s individual mandate, individuals who choose not to purchase health insurance face fines up to $2,085 in 2016.
The health insurance the law requires them to buy is so good that approximately 33 million Americans continue to go uninsured—including many who qualify for government assistance, in the form of a federal subsidy, Medicare, or Medicaid, to help pay for their insurance premiums, according to the polling group FiveThirtyEight.
About 7 million of the uninsured are noncitizen immigrants who don’t qualify for assistance, and almost 4 million more people fall in the Medicaid gap, earning too much to qualify for Medicaid in their state but too little to qualify for a federal subsidy.
The remaining 22 million who choose to go uninsured are an economically diverse group that includes 14.4 million people not easily categorized and 7.7 million individuals aged 19–34, FiveThirtyEight wrote in September 2015. The latter—sometimes termed “young invincibles”—is historically a healthy group that costs little to insure. For the same reason—their being the picture of health, or thinking they are—young invincibles are less inclined than others to buy insurance.
Their reluctance could be due to the continually surging cost of premiums for individual plans, which increased by at least 20 percent on average in 17 states in 2016. Or these individuals may hesitate because deductibles—the medical costs one pays before benefits kick in—increased in 41 states in 2016, according to Freedom Partners’ Obamacare calculators.
One reason for the rising costs is the individual mandate and fine are more persuasive to less healthy Americans, who are more expensive to insure than healthy Americans. A surge in demand for insurance drives up costs, especially when meeting that demand is inordinately expensive.
For one reason or another, the ACA’s individual mandate and penalty have proven insufficient incentives for millions of Americans who, more six years after the law’s passage and three years into its implementation, choose to go uninsured.
Like the employer mandate, the individual mandate has put affordable health care further out of reach of many Americans whom the ACA was supposed to help. Lawmakers should right their wrongs by replacing them with policies currently before Congress that would empower employers to offer and individuals to buy—or forego buying—health care coverage of their choice.
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