The news yesterday from Boeing that it would cut back its health-care insurance plans and require greater employee contributions got plenty of play as an unintended consequence of ObamaCare, but that’s actually not true. This is a feature of the Democrats’ health-care overhaul plan, not a bug. And while it certainly won’t play well with Washington voters, any kind of actual reform would almost certainly have to take a similar path:
Aerospace giant Boeing is joining the list of companies that say the new health care law could have a potential downside for their workers.
In a letter mailed to employees late last week, the company cited the overhaul as part of the reason it is asking some 90,000 nonunion workers to pay significantly more for their health plan next year. A copy of the letter was obtained Monday by The Associated Press. …
Deductibles, the share of medical costs that employees pay annually before their plan kicks in, will go up to $300 for individuals, an increase of $100. For families, the new deductible will be $900, an increase of $300.
In addition, Boeing is instituting a copayment of 10 percent after the deductible has been met. The copayment will rise to 20 percent in 2012.
Those changes will reduce the value of the Boeing plan, but it’s unclear whether that will allow the company to escape the tax looming in 2018.
The impetus for these changes is the so-called “Cadillac plan” tax that penalizes employers who offer virtually no-cost comprehensive plans to their employees. They will get git with a 40% tax on those plans in 2018, from which Democrats expected to see $238 billion in revenues in the first decade. That revenue provided critical cover to the notion that ObamaCare would be deficit-neutral in its claims, but Boeing’s action shows just how poor their static tax analysis was. The 40% tax will force employers like Boeing to pare back their health insurance offerings, and in the end people will have less coverage and the government won’t see much if any at all of that $238 billion in revenue. ObamaCare will become a huge net burden on the national debt.
However, let’s also be clear that massively comprehensive plans really are a part of the problem in escalating health-care costs. They completely screen pricing information from consumers, which leads to overuse of the system. They also shift massive amounts of compensation away from employees and to insurance companies, although employees generally don’t see it because that system has been in place since World War II and the wage mandates from the federal government. Any real reform effort would have to start at disconnecting the employer-health insurance connection, and in pushing people away from massively comprehensive insurance in favor of HSAs and serious/catastrophic insurance coverage. Only in that direction can we restore pricing mechanisms that produce supply to meet demand.
Politically, of course, this won’t play well for Patty Murray, who voted for and publicly supports ObamaCare. Instead of saving her constituents money, about 90,000 of them just got the first bill for ObamaCare, and they’re not going to be happy about it when they go to the polls in two weeks. Furthermore, those 90,000 nonunion workers will be asking why the unions don’t have to play by the same rules on Cadillac plans. Those asking those questions are not likely to feel inclined to send Murray back to Washington for another term in office.
Update: I’ve gotten a couple of e-mails informing me that the CBO accounted for this in predicting a shift to higher wages, and that’s true. Did any of the Boeing employees get raises with this change? Not that I’ve seen. If we break the tax-free link between employers and health insurance, wages will rise, but that’s not what ObamaCare does.