Public sector cutting hours due to ObamaCare, too
posted at 10:31 am on August 23, 2013 by Ed Morrissey
It’s been quite a week for ObamaCare, and we’re not even to the end of it yet. First we find out that the White House missed half of the statutory deadlines in the bill and still has almost half of them left unaccomplished. Next, UPS canceled spousal coverage because of the ACA, which will save it $60 million in costs, and CNBC described how employees might start petitioning their bosses to drop health insurance in order to score taxpayer-funded subsidies. The AFL-CIO in Nevada finally discovered what a bad deal they’re getting, and Gallup confirmed that the more people know about ObamaCare, the less they like it.
Today, we find out that it’s not just the private sector that’s looking to recover ObamaCare costs at the expense of workers:
Many cash-strapped cities and counties facing the prospect of shelling out hundreds of thousands of dollars in new health-care costs under the Affordable Care Act are opting instead to reduce the number of hours their part-time employees work.
The decisions to cut employee hours come 16 months before employers — including state and local governments — will be required to offer health care coverage to employees who work at least 30 hours a week. Some local officials said the cuts are happening now either because of labor contracts that must be negotiated in advance, or because the local governments worry that employees who work at least 30 hours in the months leading up to the January 2015 implementation date would need to be included in their health-care plans.
On Tuesday, Middletown Township, New Jersey said it would reduce the hours of 25 part-time workers in order to avoid up to $775,000 in increased annual health-care costs. Earlier this month, Bee County, Tex., said it would limit its part-time workers to 24 hours per week when the new fiscal year starts on Oct. 1.
Last month, department heads in Brevard County, Fla., were told to plan similar cuts in advance of the 2015 deadline. Brevard County Insurance Director Jerry Visco estimated the new mandate would cost the county $10,000 per part-time employee — or $1.38 million a year if all 138 part-time employees who work more than 30 hours a week are covered, he told Florida Today. The Brevard County libraries have already cut hours for 37 employees.
In a strange way, this proves Barack Obama prophetic. Fourteen months ago, the President insisted that private-sector employment was “doing fine,” but that the real problem in the economy was that the public sector was cutting hours:
The private sector is doing fine. Where we’re seeing weaknesses in our economy have to do with state and local government — oftentimes, cuts initiated by governors or mayors who are not getting the kind of help that they have in the past from the federal government.
As employers, it doesn’t appear that they’re getting much help from ObamaCare. In fact, it’s making the situation worse in the part of the economy that Obama claimed needed the most help.
Not that it’s doing anything better in the private sector, either. UPS has to cut coverage for 15,000 spouses of workers, even while Democrats insist that “if you like your plan, you can keep your plan,” to trim $60 million in costs. Delta Airlines estimates that their costs will rise by 50% more than UPS’:
We know that Obamacare will significantly increase the cost of individually-purchased health insurance in nearly every part of the country. But we’ve generally assumed that disruptions in the market for employer-sponsored health insurance will be less severe. In particular, large employers who self-insure should be exempt from most of Obamacare’s most onerous regulations. It turns out, however, that even America’s largest companies face higher costs due to the health law. A recently-leaked letter from Delta Air Lines to the Obama administration states that the “cost of providing health care to our employees will increase by nearly $100,000,000 next year,” much of it due to Obamacare.
Executives from several large Atlanta-based companies met with a member of the Obama administration in Atlanta in early June. There, the executives explained to the administration official how Obamacare was affecting their businesses. Robert Kight, Delta’s vice president for global human resource services and labor relations, wrote a follow-up letter to the official, detailing Delta’s concerns. Apparently, Delta then circulated the letter among its employees, who then sent it to Erick Erickson of RedState.com. The full text of the letter is appended to this article.
“Make no mistake,” writes Kight. “The costs imposed on Delta and our employees are very real and they are escalating. [Obamacare’s costs], when combined with normal medical inflation and the end of the [Early Retiree Reinsurance] program mean that the cost of providing health care to our employees will increase by nearly $100,000,000 next year.”
Customers will end up carrying that baggage, pun intended. The airline industry’s margins can’t absorb that kind of avalanche of extra costs without either cutting staff — a neat trick in an industry that’s seen a lot of that already — or hiking fares and/or fees. We can count that against the supposed cost savings we’re seeing as premiums escalate. And escalate they have since Obama first came into office, at a faster rate than before:
The average employer-provided family health insurance premiums have climbed $2,976 since 2009, according to an annual Kaiser Family Foundation survey released this week. They’re up $3,671 compared with the year before President Obama took office. That’s despite Obama’s repeated promises that the health care reform law he championed would cut premiums by $2,500 in his first term.
And while annual premium increases have moderated over the past two years, that’s due to trends in the insurance market largely unrelated to ObamaCare, and trends the law could actually reverse.
The Kaiser survey found that the average family premium this year is $16,351, up 4% over last year, and up 22% since 2009. After adjusting for inflation, premiums climbed an average 3.2% a year in Obama’s first term, higher than the 2.7% average during President Bush’s last four years in office.
We’re still more than a year away from the enforcement of the employer mandate, thanks to the illegal waiver granted by the White House earlier this summer. Imagine what other transformations in the labor market and in consumer prices will occur by January 2015.