ObamaCare Fails Low-Income Workers

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ObamaCare is not working. It was supposed to provide healthcare insurance for those who couldn’t afford it. Yet many of the people it was particularly intended to benefit are worse off than before the law was passed.

This fact was dramatically documented in two separate articles published in The Wall Street Journal. The first concerned the legislation passed by the new Republican Congress intended to fix one of many problems created by ObamaCare. The law imposes a mandate on employers to purchase health insurance for all those workers with more than 30 hours/week. The House of Representatives passed a bill with the support of a dozen Democrats that calls for restoration of the work- week to 40 hours.

Democrats demagogue the issue by claiming this forces workers to work more hours to gain health insurance. But what they overlook is the impact the law is having on full-time employment. Many employers are cutting workers’ hours to 29 or less to avoid the mandate. Economist John Goodman rightly points out that the law as it stands now is a tax on full-time employment

Those most affected by this tax are low-income workers. By increasing the definition of the workweek to 40 hours, many of those laid off or cut to part-time will see their hours restored. Businesses looking to expand will hire more workers if it won’t cost them the price of health insurance. Both ways benefit low-income workers.

The Employer Mandate Impact

Goodman has studied the impact of the law on fast-food restaurants. He surveyed 136 fast-food franchisees that employed close to 3,500 workers in December, 2014. Before 2014 about half the employees were “full time” as defined by ObamaCare; that is, they worked 30 hours or more per week. The potential cost to the employers of providing mandated health insurance to their full-time staff would have been about $7 million a year. But by cutting hours and taking advantage of all legal options they were able to reduce their costs to less than 1% of that amount.

For those workers still considered “full time”, they offered ObamaCare compliant insurance – the Bronze plans – but asked them to pay the maximum premium the law allows: 9.5% of their annual wage. For a $9 an hour employee working 30 hours per week this is $111 a month. However, the bronze plans have very large deductibles and copays – up to $6,600 per individual and $13,200 per family.

The companies also offered a Minimum Essential Coverage (MEC) plan – a type of mini-med insurance that covers preventive care with no annual or lifetime limits and very little else – no hospitalization, no specialist care, etc. These plans allow individuals to escape the Individual Mandate tax and employers to escape the Employer Mandate penalties because the Bronze plan was also offered.

The employers offered to pay the full premium for the MEC plans. The cost of these plans is about one-sixth of the Bronze plan premium. Of the 58 employees who still had enough hours to be considered “full time”, only one accepted the Bronze plan and all the rest chose the MEC plan.

The Employer Mandate does not require employers to cover families. But because the worker has employer-provided health insurance, they are not eligible for subsidies on the Exchange to purchase family coverage. The cost of family coverage for a family of three is about $805 a month for a Bronze plan – almost 70% of the monthly income of these fast-food workers! Even the MEC plans will cost about 25% of their income for a spouse and one child. If they fail to purchase this, they are subject to the Individual Mandate tax ($325 up to 2.0% of income in 2015, $695 up to 2.5% of income in 2016).

In Goodman’s survey of the fast-food industry, he found only one worker in about 3,500 who was actually getting the kind of insurance that the architects of the Affordable Care Act wanted everyone to have. Surely this represents failure of the law to provide affordable healthcare insurance for those who need it – no matter what your political persuasion.

 

 

 

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