The Full Effects of Obamacare Just Starting to Make the News

This is a highly instructive story about Wal-Mart dropping health coverage for part-time workers (hat tip to a reader -- I always forget to ask if they are OK having their name used).  The writer is amazed at unintended consequences that were so hard to envision that complete non-experts like me predicted them days after the law's passage.

  • The writer is amazed that Wal-Mart would support Obamacare and then try to evade its provisions.  This is how the corporate state works.  Wal-Mart was an enthusiastic supporter of Obamacare NOT because it believed the law made any sense, and not because it had any intention of complying with its spirit, but because it knew that its size, political clout, and infrastructure would allow it to duck the new costs of Obamacare more easily than its competition.
  • We see unintended consequences run wild.  Wal-Mart was guilted into providing some health care coverage of part time workers because of tear-jerker news stories about these folks having no other alternative.  But under Obamacare, they do have an alternative (Uncle Sam) so the pressure on Wal-Mart to provide the care to avoid bad PR is removed.
  • I am amazed that we seem to naturally assume that providing health care is an employer's obligation.  This is just bizarre, and applies to none of our other needs.  Employers pay us money, we spend it according to our preferences to fulfill our needs and caprices  (a great phrase I stole from Agatha Christie via Hercule Poirot).   “Walmart is effectively shifting the costs of paying for its employees onto the federal government with this new plan".  I would have said that Wal-Mart is shifting the choice of how to spend their total compensation back on the employee.
  • The cat is almost out of the bag on the story I have promised to be the biggest economic story of 2013:  "Several employers in recent months, including Darden Restaurants, owner of Olive Garden and Red Lobster, and a New York-area Applebee’s franchise owner, said they are considering cutting employee hours to push more workers below the 30-hour threshold."  These guys are just being coy in public if they are saying "considering."  I know insiders in the restaurant industry and they have been working on definite plans to part-time their entire work force for well over a year.   By mid-2013, the service worker who works more than 30 hours a week will be a dinosaur
  • Some time in the past, we really screwed up the whole concept of health care "insurance."  One person complains in the article:  “The packages Walmart is providing for low-income people aren’t offering very much coverage except for catastrophes."  Gee, I could have sworn this is exactly what insurance is supposed to be.  Her statement is like saying "my home insurance isn't offering much coverage except in the case of major damage to my house."
  • Every extra dollar Wal-Mart pays for its employee's health care costs is another dollar added to the shopping bill of the lower income people who shop there.
  • LarryGross

    I think you are mis-reading what is happening and I think in the end - Walmart employees will be able to get health care no matter what WalMart does to working hours and I think once people can get health care on their own, they may not consider Walmart as good a place to work as other alternatives and I further think that over time, this
    may well cause Walmart to re-think how they treat their employees since those employees will have a lot more more freedom to pursue other work even at local small businesses.

    At some point if the Govt makes health insurance a fully taxable compensation at the same time people can get insurance at the exchanges, what will happen?

    time to really think about things rather than sound-bite propaganda...

  • LarryGross

    the fact that Walmart employees currently get MedicAid, food stamps and reduced cost lunches for their kids means what?

  • Lemet

    1.Most Walmart jobs are entry level. The averge Walmart employee is already a dependent.
    2. Who the hell works at Walmart for the health insurance (which you are confusing with health care, they are two entirely different things).
    3. The "local small business" is less able to afford Obamacare than Walmart is, that is why Walmart supported it.

  • LarryGross

    re: already a dependent.. then why do they offer health care and why do a good percentage of WalMart employees get MedicAid?

    "local small businesses" of less than 50 employees are subject to what stipulations under ObamaCare?

  • Sean Wise

    I'm not sure what you mean by the "local small business". A mom and pop grocery store with less than 50 employees get's by without providing health care coverage but their employees can get it on the exchange without their employer paying a penalty. Walmart will hold some employees to less than 30 hours to reduce the amount it has to pay in penalties but their employees will still be able to get coverage from the exchange. In fact, between the penalty and the amount their employees pay on the exchange, Walmart workers will likely get a better benefit for less money. You'd think that the large legacy chains might come out ahead since their employees have some of the best health care benefits going. But I suspect that growth of Medicaid will lead to a larger pool of people in the government's insurance pool and the government only reimburses 75% of the cost for the health serviced provided. This will require even high costs to be charged to those with private health insurance coverage to make up for the shortfall. So all those unionized workers at Safeway, will see their costs for coverage rise again. So Walmart, by being stingy, might actually see the cost of its employee's health care coverage be born by its higher priced competition. What a system!

  • LarryGross

    re: " But I suspect that growth of Medicaid will lead to a larger pool of people in the government's insurance pool and the government only reimburses 75% of the cost for the health serviced provided"

    Does MedicAid require provides to accept what they pay like Medicare does? Isn't that better than someone showing up at the ER to get care and all of it gets cost-shifted?

  • Sean Wise

    I think that cost shifting to the ER is a bit of a red herring. From what I've heard, the emergency room care for the uninsured costs about $30 billion annually. The cost for under compensated Medicaid and Medicare is on the order of $200 billion per year and its gets worse when the economy slows down. People on private plans cover this shortfall in their health insurance premiums. Since 30 million more people are expected to be added to the Medicaid roles under Obamacare through the exchanges, expect the cost of private health care insurance premiums to rise to cover this. Remember, Massachusetts has a similar plan and it resulted in those still insured under private health plans paying the highest premiums in the nation.

  • http://profiles.google.com/maruadventurer john mcginnis

    " Her statement is like saying "my home insurance isn't offering much coverage except in the case of major damage to my house."

    Better go check you homeowners policy. Just received mine for reup this year. When I read the rider about the only thing my coverage guarantees is hurricanes. I live in N Central TX, that's not likely. I almost considered dropping it.

    There is also another major difference between RE insurance and health insurance. Nearly everything that RE insurance covers are events beyond the homeowners control. That is not the case with health insurance. Except for congenital defects the great majority of health choices can be minimized. Heart disease which is the number one killer of Americans is a lifestyle outcome.

  • http://profiles.google.com/maruadventurer john mcginnis

    "At some point if the Govt makes health insurance a fully taxable
    compensation at the same time people can get insurance at the exchanges,
    what will happen?"

    What do you mean `if`? SCOTUS in rendering its opinion FOR Obamacare did so under the taxing authority of Congress.

  • MingoV

    "...we really screwed up the whole concept of health care "insurance."

    True. Health insurers competed by covering more and more things with lower and lower deductibles and co-pays. Auto insurers offer 100% coverage for glass and theft and low deductibles for collision. Home insurers offer deductibles of $500 or less. Many people now purchase home warranties to cover home and appliance repairs. The concept that insurance is a method of preventing large financial losses died decades ago. Most people today do not have the willpower to pay less for high deductible insurance and bank the savings so money will be available for routine expenses.

  • LarryGross

    have you got some cites for you numbers? Medicare, B,C,D pay providers not hospitals. Part A pays hospitals. But I think it is also a mistaken belief that people without insurance don't
    get health care and that we don't already pay for it. Those who go on ObamaCare/MedicAid are already getting health care but very expensive health care, right?

  • LarryGross

    if you go to http://finder.healthcare.gov/, you'll find that the Exchanges incorporate lifestyle choices in their costs and coverages.. ...

  • LarryGross

    Does anyone know why employer-provided insurance is tax-free while if someone does not have employer-provided and buys their own and/or pays out of pocket that they cannot deduct it until it exceeds 7.5% (10% in 2012) of AGI?

    If people could deduce 100% of their self-paid insurance and healthcare costs that would seem to be a more level playing field - AND could seem to have more people making market-based decisions.

  • SamWah

    My understanding (standing by for corrections!) is health insurance started at Kaiser Shipyards as a way to get around salary limits during wartime. Being short on manpower is a bad deal, and this was an inducement. And then, like Topsy, it "just growed".

  • http://devilish-details.blogspot.com/ mesaeconoguy

    Why is healthcare tied to employment at all?

    There is no reason whatsoever for that to be the case, so stating it is “income” to be “taxed” is preposterous on its face.

    Another asinine post from Larry Grosslyuninformed…

  • http://www.facebook.com/matthew.slyfield Matthew Slyfield

    If the government actually wanted people making market based decisions half the federal government would vanish and your income tax return would fit on a postage stamp.

  • http://www.facebook.com/matthew.slyfield Matthew Slyfield

    You think the under cost of Medicaid and Medicare don't get shifted to patients not covered by government price controls?

    ERs cant turn away patients including those on Medicaid and Medicare but your primary care physician can. A lot of doctors already refuse to accept new Medicare/Medicaid patients and according to several doctor surveys the number of doctors doing so is likely to increase significantly over the next two years.

  • http://www.facebook.com/andrew.m.garland Andrew M Garland

    The federal government continues to explore macroeconomics by doing massive experiments on the populace. Feel like a guinea pig yet?

    Consider an employer of more than 50 full-time workers. The penalty "on the employer" for not providing health insurance is a complicated brew, up to $2,000 per employee. We will be able to measure experimentally the comparative elasticity of labor supply, labor demand, and investment demand. In simpler terms, we will find out how much of the penalty creates lower wages, creates a lower return on investment (and less investment in new jobs), and/or produces higher prices. The data will be a boon to economics professors, who will study it for years.

    It may seem that the employer is paying for most of health insurance. But, all costs of employing people, including health insurance, are paid for out of the production of the employee. If the employer did not pay for health insurance, then that part of employee compensation would be paid in cash, through competition for workers.

    The penalty, supposedly on employers, will mostly reduce the employee's benefits and cash wage by $2,000 yearly. Any increase in insurance costs mandated by ObamaCare will also mostly reduce cash wages. Companies are finding ways to limit their costs under ObamaCare because they don't want to directly reduce wages and they want to stay in business.

    Ironically, if an employer-provided health benefit now costs more than $2,000, the employee's salary will go up by the savings. But, the employee will then have to buy insurance at an exchange. The employee is effectively taxed $2,000 at work, to be given a subsidy at the exchange. People will never understand this complexity.

    Many employers want to entirely escape these taxes which must fall on the worker. Their workers can't afford the reduction in cash salary which would result from participation in Obamacare. Their workers would quit to work for some other company who could offer a larger salary, a company of less than 50 full-time workers.

    ObamaCare is designed to put the employer in the middle, so that workers will be angry at the employer for any problems. This is part of the anti-business stance of Team Obama. The eventual failure of ObamaCare will be blamed on supposedly greedy businessmen who would not supply reasonable insurance to their employees. But, it is entirely government failure.

    Company Paid Health Insurance is Part of Your Salary
    The employee earns his health benefits as part of what he is paid. The employer writes the check for him.

    Obamacare: What the Future Holds
    03/23/10 - Econlog by Bryan Caplan - A review of ObamaCare penalties and incentives.

    ObamaCare will cut jobs and wages
    01/2011 - Heritage - The effects of ObamaCare

  • Cherise

    One thing I notice about the Larry's of the world is a strange unfounded faith that their masters have magical powers, and obedience is a ticket to success. They really can't understand that central planning isn't the most efficient way to do things, and that human beings don't become magical saints when given unaccountable government power.

  • Cherise

    Reading some of the comments on another discussion here about this health insurance mandate, it's pretty clear that a lot of people have a fetish for micromanaging other people's lives and making demands on other people's private business.

    In particular, it's clear that some people get off on directing other people's resources and making sure they don't get away with anything. (The government will audit you! There is no escape!)

    How sad are we as a country that we have these people spending all day worrying about what others are doing, rather than minding their own damn business? This sort of thinking is encouraged by politicians and government bureaucrats, and it's the worst sort of greed. (Meanwhile the greedy control freaks point fingers and call those who wish to keep their own resources 'greedy')

  • NormD

    A point conservatives/libertarians have been making for years. For whatever reasons liberals want you to get health insurance through your employer rather than buy it yourself.

    Make no sense. Never has, never will.

    People should find a plan that meets their needs, buy it, and carry it though their career. Why anyone thinks my employer is better able to choose a plan than me seems bizarre.

    One point of concern is allowing deductions for "healthcare" costs. People do try to expand whats included as "healthcare". Gym memberships, etc.

  • http://profiles.google.com/maruadventurer john mcginnis

    That is no different than what the private sector insurance does today as well. Your observation however is not pertinent to the comparison that was being made.

  • CTD

    So do the employees of thousands of other companies. What is your point? That WM workers should not be eligible for them?

  • obloodyhell

    }}} I would have said that Wal-Mart is shifting the choice of how to spend their total compensation back on the employee.

    LOL, well, except that the employees don't have any choice. Not that that's Wal-Mart's direct fault.

  • obloodyhell

    In my county they passed a half-cent sales tax to fund local health care, plus compensate hospitals for non-paying uninsured visitors.

    I wonder if we'll get that half-cent reduced to a quarter-cent when Ocare kicks in and the local health department doesn't need external funding...?

  • obloodyhell

    }}}} "People do try to expand whats included as "healthcare". Gym memberships, etc."

    I think you can make a case why this MIGHT be covered, since it's basically a preventative measure, if you actually use it. Probably smarter if you could tie to lower premiums if you improved your health instead.

  • obloodyhell

    }}} " it's pretty clear that a lot of people have a fetish for micromanaging other people's lives and making demands on other people's private business."

    Yeah, it's postmodern liberalism if it's socioeconomic, and, to be intellectually honest, it's religious-conservatism if it's sociopolitical (i.e., legal enforcement of social mores).

    While I'd choose the latter somewhat when it comes to small-scale activities and I can't tell BOTH forms of Mrs. Grundy to eph off, both are a form of hypocritical social quackery.

  • obloodyhell

    }}}} Feel like a guinea pig yet?

    No, but there are definitely times when I feel like Raggot the gerble.

  • obloodyhell

    }}} Heart disease which is the number one killer of Americans is a lifestyle outcome.

    While this is certainly a substantial contributing factor, this is hardly a correct assessment. My GF died of heart failure at 87. He didn't smoke, drink, nor "carry on", was probably not overweight even by modern ridiculous standards (certainly not by those of the time), got up early and went to bed early, and worked steadily until about 3 months before he died. He had a pacemaker first installed when he was about 60, and was on his third one when he passed away. When he died, it was mainly because his heart was leaking from the seams... aka "heart disease".

  • obloodyhell

    }}} I know insiders in the restaurant industry and they have been working on definite plans to part-time their entire work force for well over a year. By mid-2013, the service worker who works more than 30 hours a week will be a dinosaur

    Warren, how are these bigger entities avoiding the "aggregate hours" requirement -- that is, as I understand it, after a certain number of hours total, they have to pay into the system anyway... so adding employees while keeping the same number of hours worked ought not to help. I figure you know exactly what this requires, since you're dealing with the issue, too.

    The other thing, of course, is that, in a couple years, after people are used to this screwjob, they'll extend it down to cover all workers, even minimum-wage workers working five hours a week.

  • Curtis

    Heart disease is often totally hereditary. The same day I got my abnormal EKG, I was playing racquetball against the one of the top college women racquetball player. Despite keeping in shape, at 50 my "widow maker" artery was 99% blocked. I only found out because I had a physical for extra life insurance.

  • LarryGross

    well here's another question. Why doesn't the military just give their soldiers the cash equivalent of TRICARE and vouchers for VA care instead of them providing the insurance and govt/socialist hospitals.

  • Lemet

    I said the average employee is a dependent. According to Walmart Watch (no friend of Walmart) 2% of Walmart employees receive MedicAid. Not at all a "good percentage" . As was pointed out already many companies with part-time employees have employees who receive MedicAid. I was too lazy to get the percentages, but the list includes McDonalds, Burger King, Winn-Dixie, Tyson, etc.

    I did forget small businesses are exempt from Obamacare (at least for now), thanks for pointing it out.

  • LarryGross

    this is one of the things i've read where i saw higher percentages:

    http://www.politifact.com/truth-o-meter/statements/2012/dec/06/alan-grayson/alan-grayson-says-more-walmart-employees-medicaid-/

    so I end up wondering if the lowest tier of folks are already on MedicAid and SCHIPS then who are the additional folks that will be on obamaCare/MedicAid?

    I would assume that they are also workers who do not get employer-provided health care or cannot afford it ....

    It's still erroneous for us to think that because a person does not have health insurance - that they don't get health care. they'll get it from MedicAid and if they don't qualify for MedicAid, they'll show up at the ER which has to treat them - and then those costs get shifted to those who do have insurance.

    In other words, we are already paying for those folks so what obamacare does, in effect, in bring them in under a primary care umbrella and away from urgent care.

    From the beginning .. it seemed to me that opposition was predicated on the idea that ObamaCare would cost everyone more. I'm not convinced that it will cost us any more than
    people going to ERs for their care.

    if you have not done so, you ought to go to healthcare.gov and give it a look. It dispels some myths and erroneous ideas that have been making the rounds.

    For instance, you can buy catastrophic insurance for less than 100 a month.

  • LifetimeObese

    So not only do I have to buy a certain type of insurance but the government is going to charge me more for being fat based on dodgily loose correlations between BMI and most every health condition known to man kind. peachy.

  • mesocyclone

    Is there any evidence that WalMart supported Obamacare for competitive advantage, or is this just speculation? I'd guess the later.

    More likely is that they supported it because a WalMart heir is a big weenie liberal, and he thought it was a good idea.

    I was invested in WalMart when the founder ran it. But the kids of founders often are not good businessmen.

  • Sean Wise

    There an article on an interview with the CEO of Aetna. He sees much bigger increases of 25 to 50% for health insurace for many private healthcare plans and as much a 100% increase for people in small group plans. http://www.bloomberg.com/news/2012-12-12/aetna-ceo-sees-obama-health-law-doubling-some-premiums.html Interestingly, people who get insurance from the exchanges and are eligible for subsidies will see 60% cost reductions and those not eligible for subsidies will pay 10 to 13% less on the exchanges. If you look at this as squeezing a balloon, it seems like the legions of folks who will be picked up by the government programs will end up having a significant portion of their insurance premium picked up by those on private plans. Considering that close third of an hourly worker's compensation is already being diverted to the healthcare industry today through insurance premiums paid for by the worker and employer, payroll taxes and out of pocket costs, this might just finacially cripple what's left of the private health insurance system. Honestly, I think that was the intent of Obamacare all along.

  • MNHawk

    That you are not brighter than any other Obama voting moron, only capable of passing along talking points of the most moronic kind.

    If you were capable of thinking beyond the talking point, you would realize you were calling for WalMart policing it's employees' family planning...their breeding! Then again, you union types never have been all that bright, have you?

  • Bobcat

    Not sure where you can find it. I sure couldn't here in Texas. My wife and I are paying a total $700 a month for individual policies. That's with a $1,000 deductible.

  • Bobcat

    You mean a LOOPHOLE?

  • Bobcat

    There really is no "preventative." There is just a deferral of medical costs.

  • Dave Keasey

    The system is built to implode... People are generally pretty smart and will focus on their personal advantage in a situation like this. When they figure out that 1) They can't be denied coverage for a preexisting condition, and 2) The penalty for not having insurance is small compared to the premiums, can you guess what will happen?

    In my case, I look at premiums of something like $1500 to $1800 per month for the policy I could get for my wife and myself. Then I look at the penalties (for an entire year of non-participation)... Around $700 in 2014, $1400 in 2015, and $1800 in 2016. The math is not complicated. Without a doubt I'm better off paying the tax than to get insurance before I'm sick and need the expensive care. The only thing you have to worry about is a catastrophic incident that requires massive expenditures before you can get the insurance policy activated.

    Obamacare is designed to destroy the health insurance companies and bring on single-payer coverage, funded out of the US Treasury, rather than depending on premiums paid by participants in the plan.

  • LarryGross

    You can buy catastrophic from the Exchanges if not mistaken. So in that regard - you could also have an HSA and pay out of pocket - and you'll always be able to get insurance - just choose the options that best fit your needs.

  • Dave Keasey

    IIRC, the so-called catastrophic coverage offered by the exchanges is still far more expensive than the penalties... People are rarely altruistic, and will opt for the much cheaper alternative. The system as now designed is simply doomed.

  • LarryGross

    I checked Virginia the other day and it was less than $100 a month. What does private catastrophic cost?

    i'm not defending ObamaCare - but what I'm hearing doesn't sound exactly right to what I've found in looking at it. There's been a whale of a lot of propaganda ... and far more of it than actual evidence or facts.

    I think it will not be without problems, maybe a lot, perhaps fatal... but right now I'm not sure that people really know how it works despite the non-stop "stuff" about it.

    The exchanges work similarly to the Federal Employees Health Care which has similar "exchanges" where an employee can buy anything from bare catastrophic to gold-plated-cover-everything - and pricey.

    With the FEHB and the obamaCare exchanges a significant benefit is that no one will be denied insurance. They might well be charged more if they smoke, etc.. but everyone has access.

    it Is going to cost more people more money - no question but if the people who get subsidized ObamaCare no longer go to ERs for their care - there may be offsetting savings but we won't know that for a while... and people who get more comprehensive care - even if subsidized - will have disease caught earlier and way less expensive than showing up at the ER really sick with an advanced disease that will cost out the wazoo to treat.

  • Dave Keasey

    What is the website for estimating VA exchange premiums? What age bracket did you specify, what income level did you estimate, and what "options" did they provide for the levels of coverage? Oregon, who is one of the early adopters of the exchange system only has one level ("Bronze", which is probably basic catastrophic coverage) in their online calculator. Their calculator gave me the $1700 premium.

  • LarryGross

    1700 a month for Catastrophic? that does not sound right. If it's that much for catastrophic, how much is it for a more inclusive policy? something is not right here

    I do not remember exactly what i put in.. but I think it was a young single...

  • Dave Keasey

    Try putting in a middle-age number, around (say) 45, and a family of two. The costs for those below 30 are less, and they may have "catastrophic coverage" less than the Bronze Level available to them (that's not clear to me). Still, I find it difficult to find premiums that are less than the penalties, even when I get down into the subsidies for those with lower incomes.

  • The Elephants Child

    Employer-paid health care came into being during World War II. The administration had imposed wage-price controls, and employers could not give raises, so they came up with the scheme of offering employer-paid health insurance. And it has existed ever since, since there is no federal department of disposing of stupid laws. See "The Social Transformation of American Medicine"— Pulitzer Prize fin 1982— By Paul Starr.

    WalMart was quite involved in the federal "Welfare to Work" campaign of the Bush administration, which was so successful. Entry-level workers were required by the government to be enrolled in Medicaid, for their first year, I believe, so health care would not be a worry. WalMart helped new workers to sign up for the programs required by the legislation, but liberals attacked WalMart for "putting people on welfare" — a really unjust accusation.

    If anybody wants to lobby for a Congressional Committee for Deregulation, I'll join in.

  • LarryGross

    well as they say, perhaps your mileage will vary but i do question the 1700 figure. Did you get a figure for typical coverage/ What was that? Something is not right here. What does a catastrophic policy for a family of 4 costs on the private market?

    have you ever actually bought health insurance before?