Gaming The System

gaming“The ability of employers to mostly evade liability is increasingly obvious………”

ObamaCare Employer Mandate Is Worse Than Feared

Wendy’s initially expected its health insurance tab to jump by $25,000 per restaurant, but cut that to $5,000 after finding few interested employees. APYet another study purporting to show that ObamaCare hasn’t caused many people to work fewer hours has set off another round of high fives among the law’s boosters.

But they should hold their applause, because there’s a strong case that ObamaCare’s employer mandate is worse than its critics feared — though not necessarily for the reasons they expected.

While ObamaCare has clearly had a negative impact on work hours, which one serious flaw of the latest study — counting 29.5-hour workers as full-time — and other data limitations help to obscure, it’s fair to say that the law hasn’t curtailed full-time work in a big way. But that’s because employers have figured out how to dodge liability by offering “affordable” coverage that costs much more than their modest-wage workers are likely to pay.

Gaming The System

This gaming of the system, which ObamaCare rules invite, has serious consequences. A few million full-time, modest-wage workers — and their spouses — have remained uninsured, with many liable for ObamaCare individual mandate penalties. Another roughly 1 million low-wage workers have opted for the kind of coverage that ObamaCare was supposed to do away with:skinny plans that won’t cover hospitalization or surgery but will let them avoid a penalty.

Many other full-time, modest-wage workers are getting more comprehensive coverage via their employers — but with $5,000-plus deductibles that could easily torpedo their finances in a health emergency.

These are the direct effects of rules that deny full-time workers access to ObamaCare subsidies — and let employers escape a fine — if they offer bronze-level coverage costing a worker close to 10% of wage income for premiums alone. For a full-time worker earning $17,500, paying $1,670 for bronze coverage qualifies as “affordable.” That’s $1,000 more than someone at the same income level would have to pay for an exchange plan that caps total out-of-pocket expenses at about $550 in 2016.

Then there are the indirect effects of employer mandate rules that leave so many low-wage, full-time workers with coverage that is of little use.

The prevalence of underinsured full-time workers partly explains why UnitedHealth (UNH),Aetna (AET) and other insurers have complained about people signing up for ObamaCare coverage midyear and running up big bills. Without appropriate coverage, low-wage workers may have to quit their jobs, at least temporarily, to get low-deductible exchange coverage if a serious health issue arises.

When low-wage full-timers can’t afford coverage, is it any wonder that many — some older and not necessarily in robust health — have opted to work fewer than 30 hours to qualify for exchange subsidies (even if they might prefer to work longer)?

The employer mandate has simultaneously thrown low-wage, full-time workers under the bus and contributed to a narrow, relatively high-cost insured pool that is detrimental to the goal of providing affordable care.

The ability of employers to mostly evade liability is increasingly obvious. Andy Puzder, CEO of Carl’s Jr. and Hardee’s parent CKE Restaurants, says that just 420 of 5,453 full-time workers offered a $5,500-deductible plan were willing to pay the $1,116 premium. The New York Times reports that insurance takeup by fewer than 10% of low-wage workers is commonplace.

Wendy’s Slashes Health Tab

Wendy’s (WEN) initially expected its health insurance tab to jump by $25,000 per restaurant, but cut that to $5,000 after finding few interested employees.

Employers in service occupations pay even less on health insurance per hour of work than they did when ObamaCare passed in 2010, Labor Department data show.

The latest study in Health Affairs on ObamaCare and part-time work did find a meaningful, if modest, increase in 60- to 64-year-olds and workers with less education who were clocking fewer than 30 hours per week. But the authors’ broad conclusions were skewed, in no small part, because they counted close to 5 million workers who are reported to work exactly 30 hours per week as being full-time under ObamaCare.

Yet, Census interviewers are instructed to count 30 minutes or more as a full hour, meaning an uncertain number of those workers may have their hours capped at 29.5 per week. White House economists made this same mistake, later acknowledging that its analysis “may be misleading” and advising that analysis of the law’s impact on work schedules should exclude 30-hour workers.

The incentives are highest — for employers and modest-wage employees — to reduce work schedules as they get closer to 30 hours. For employers, it means avoiding a potential spike in hourly compensation costs right at 30 hours. For employees, perhaps just $5-$10 less per week could mean the difference between being able to get affordable insurance or going uninsured.

When you exclude 30-hour workers, the picture is striking: The number of people working just above 30 hours relative to those working just under ObamaCare’s full-time threshold dropped abruptly in 2013, coinciding almost perfectly with the initial measurement period for employer penalties. The timing also matches up well with the relapse in the average workweek in low-wage industries that can be calculated from Bureau of Labor Statistics data. During that same period, there was a surge in anecdotal reports of employers cutting work hours, which IBD collected in a database that grew to 450 employers.

While the ranks of workers who can’t find full-time jobs have fallen by about 3 million in recent years as the economy recovered, they remain nearly 2 million above their level when the jobless rate was last at 5%. General service occupations have become stubbornly dependent upon part-time work, as the 2015 Economic Report of the President and a separate report from the Atlanta Federal Reserve last year both noted.

Meanwhile, those working part-time by choice are up 2 million since ObamaCare’s passage, with three-fourths of the gain coming since the end of 2013, when the law’s insurance subsidies became available.

Yet the authors of the study, from Indiana University and the Agency for Healthcare Research and Quality, derived a ballpark estimate that perhaps just 250,000 people are working fewer hours due to ObamaCare. Here’s why their conclusion can’t be trusted:

Relevant data cover about 6 million workers, with just 2.2 million working from 31 to 34 hours and close to 4 million from 25 to 29 hours. Since this group accounts for less than one-fourth of part-timers, studying movements on either side of 30 hours can only provide a signal as to whether ObamaCare’s incentives have had a meaningful impact on behavior, not a full measure of the impact.

Yet the authors, by lumping in 5 million workers reported to work 30 hours, even though an unknown number are part-time under ObamaCare, make it impossible to get a reliable signal of how workers just over the 30-hour mark have been affected.

The authors said they tested to see if their use of 30-hour workers threw off their results, but the way they did so — swapping those 5 million workers for another 5 million or so workers reported to work 35 hours — was guaranteed to produce an equally unreliable result.

Their study of what happened to workers just below 30 hours did turn up a “significant” though “small” increase in the “adjusted probability” of working 25 to 29 hours from 2013 to 2014. Yet “adjusted probability” involves a lot of guesswork, and this comparison uses 2013 as a base, when the number of workers clocking just below 30 hours was already moving higher that spring as companies braced for mandate penalties. In raw terms, the number working 25 to 29 hours jumped by 11%, or 373,000, from 2012 to 2014 on a 12-month-average basis. Their ranks are up 1.2 million since the start of the recession.

JED GRAHAM | |  @IBD_JGraham


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