President Obama’s signature health care reform law just passed its one year anniversary, but many companies have yet to come to terms with what the new law will mean for their operating costs and bottom lines. Large firms flush with low-wage workers will get hit hard because their bare-bones, low-cost employee health insurance policies don’t comply with the new law, which takes effect in 2014. These companies will have three choices: offer an unlimited insurance minimum, or reduce their workforces.
So far this year, the Department of Health and Human Services has granted 1,040 waivers to companies, insurers and unions wanting to continue offering enrollees limited health-benefit or mini-med plans, which cap payments at $2,000 annually—a practice which is at odds with the law’s 2011 requirements that companies provide each employee a minimum of $750,000 in yearly coverage, increasing to $1.25 million in 2012, $2 million in 2013, and unlimited in 2014. Examples of exempted organizations are Ruby Tuesday, Jack in the Box, United Federation of Teachers, McDonald’s, Cracker Barrel, United Agricultural Benefit Trust, and Waffle House.
(The Fiscal Times contacted a number of exempt companies and organizations but all declined to comment.)
McDonald’s Corp. was the first to petition for an exemption this fall after the company threatened to stop offering health insurance for 30,000 employees on mini-med plans. In addition to protesting the coverage cap increase, McDonald’s argued that a new 2011 mandate requiring all insurers to pay out least 80 to 85 percent of all premiums on health care claims would jeopardize the company’s ability to provide the plan if the insurer balked.
The health law might lead large firms that employ multiple wage groups to separate out their employees and push the lower wage workers toward exchanges, while leaving the health plans of higher wage workers intact, said Joe Antos, a health economist at the conservative American Enterprise Institute. “But thinking about the McDonald’s story, and others in the same boat, you can’t section off the low wage workers,” Antos said.
“Those companies won’t be able to subsidize insurance coverage, these workers won’t get a raise in wages, they’ll lose their health insurance, and many of them won’t be able to buy it in exchanges because it will be significantly more expensive for these workers accustomed to minimal mini-med payments….(workers) will be worse off than they are today.” For that reason, it’s likely that HHS may consider longer-term waivers past 2014, Antos said. Otherwise, it’s possible that these companies will pay the $2,000 per person fine for some workers, and make up the cost by laying-off others, he said.
Though the waivers allow these organizations to avoid steep cost increases and maintain mini-meds temporarily, they don’t answer the bigger question of how large companies with low-wage workers will revamp hiring practices, health care offerings, and overall company operations to accommodate a 2014 federal law requiring large companies to offer full-time employees a more generous benefits package or pay the government a $2,000 fine.
“It’s reasonable to presume that employers will gradually stop offering health insurance altogether in these situations,” said Austin Frakt, a health economist and professor at Boston University’s School of Public Health. “I don’t see where that revenue would come from to offer a much more generous product since worker wages are already so low and there’s no room for tradeoff there,” he said, adding that the most logical place for these workers to go for insurance would be the state health insurance exchanges.
State health insurance exchanges are government-organized marketplaces where individuals, families and small businesses can seek health insurance by pooling together with others to negotiate quality care and low premium rates. According to the Congressional Budget Office, about 24 million people will buy coverage through these exchanges by 2019. Between 2014 and 2017, only businesses with 100 or fewer employees can join the exchanges. After 2017, states can raise or eliminate that cap.
Related Links:
Conservative Group Sues HHS Regarding Waivers (Modern Healthcare)
Romney Promise: A Health Law Waiver for Every State (Wall Street Journal)
California Businesses Unclear on Health Reform Law (Los Angeles Times)
