When you hear the words “Obamacare” and “business” in the same sentence, these days, you know it’s not going to be good. Anything pairing the health reform with business is bound to wade into the many ways in which the legislation will supposedly hurt the bottom line of hard-working American enterprises or force them to lay off people or cut employees hours.
If you look at the big picture, though, Obamacare seems like a pretty good deal for U.S. business. But before I argue my case, a quick refresher about how the American health system works. Essentially, it is a hybrid system, partly provided by private, commercial health insurance and partly by social insurance, where the government provides benefits financed through taxes and other means to eligible people. If you’re an adult under 65, you fall into the first category. You must buy your own insurance or receive benefits from your employer, which is what 60% of Americans do. Until the ACA, if you could do neither, you’d be uninsured. (Even under the ACA, a number of people will remain uninsured, but that’s a story for another day.) If you’re 65 and over, you get Medicare, the social insurance program. Then there’s Medicaid, the government’s health care for the poor, a patchwork system where the definition of who qualifies for help varies between states.
Let’s leave Medicaid aside for now and focus on the other two. Under the new system, the approaching mass retirement of baby boomers will coincide with a massive health care cost shift from American businesses to the federal government. In a sign of what’s to come, Medicare enrollment grew to 48.9 million in 2012, a two-million-person increase from the previous year. It was the biggest gain across all types of health plan, government or private, according to the U.S. Census Bureau. And this trend is only going to accelerate.
Obamacare could have forced businesses to continue to cover some of the health needs of their elderly, retired workforce. That would have helped contain Medicare spending. But it didn’t. On the contrary, by creating and subsidizing more affordable individual commercial health insurance options, it is effectively encouraging a shift even in the cost of covering younger adult Americans from company budgets to family and government budgets.
Sure, in general terms, the law forces employers to offer health insurance. But there are so many caveats, the actual effect of the reform will likely be the opposite. Small businesses, for example, don’t have to. And even those that did, can now drop their plans and send their workforce onto the Obamacare insurance exchanges with a clear conscience. For these companies, terminating employer-sponsored-insurance no longer means having uninsured employees, it means it’s up to them and the government to take care of the problem. Similarly, bigger companies must cover full-time staff but not part-timers. If they did cover the latter, they can now happily send them onto the exchanges. Also, the law doesn’t make it illegal for larger companies not to offer insurance. It simply imposes a fine on those that don’t. This means some employers might find it more convenient to just pay the penalty, terminate their coverage, and — you guessed it — send people on the exchanges.
Just to be clear, I think that relieving business of some of the burden of insuring Americans is a good thing. Only in the U.S. have companies had to worry about taking care of the basic health care needs of their employees. With fewer health care costs weighing down their bottom line, some might even be able to give their workers a much-needed pay boost.
The real problem with Obamacare, as I’ve pointed out before, is that it offers no credible solution to contain America’s runaway health care costs. And as long as medical inflation grows faster than the U.S. national income, neither business, nor families nor the government are going to be able to foot that bill forever.
Insofar as Obamacare shifts around unsustainable costs, though, businesses are likely to be the ones feeling lighter after the reform is enacted.
Erica Alini is a reporter based in Cambridge, Mass., and a regular contributor to CanadianBusiness.com, where she covers the U.S. economy.