Consequences of Health Care Law Coming to Light

Statement

From the outset of the health care debate, President Obama and other supporters of the health care bill maintained that no matter how drastically our health care system was overhauled, "If you like your health care plan, you can keep it." Yet less than two months after the President signed the bill into law, we're already beginning to see why so many criticized such promises as empty and impossible to keep.

Big companies with longstanding employer-sponsored health care plans - such as John Deere, Caterpillar, AT&T, and Verizon - are examining costs and are contemplating paying a fine to the government in lieu of continuing their much more expensive employee insurance programs. After reviewing Congressionally-requested internal documents from these companies that outlined this possible exodus from employer-sponsored insurance, supporters of the health care bill in Congress were so surprised that they cancelled a proposed hearing on the effects of the new law. The companies' analyses of the impact the new health care revealed worrisome, but far from unexpected estimates.

Last July, when the bill was still in the early stages of development, I spoke on the Senate floor warning that the law's penalties for businesses that don't provide health insurance would create a perverse incentive. "When you do the math, this is no penalty at all, compared to the cost of private insurance ... [it would] directly encourage employers to dump their employees" from their health insurance. "Paying the so-called penalty to get out from under these private health insurance costs looks like a pretty smart business decision." The Administration denied this. Now, ten months later, companies are in fact contemplating it.

This provision could have significant savings for businesses and costs for taxpayers. AT&T, for example, estimated that paying the government fine instead of providing employee insurance would cut their annual health care expenses from $2.4 billion to $600 million - a 75 percent savings, which is jaw-dropping for any business. An official from John Deere has indicated they should look into "just paying the fine," and Caterpillar is giving it "serious consideration." If a major employer discontinues health insurance for its employees, brace yourselves for their competitors to do the same.

And yet, when the Congressional Budget Office scored the health care bill, it assumed that companies would be covering more employees in ten years, not fewer. This optimistic view led to an optimistic cost projection. If an overwhelming number of unanticipated Americans lose their insurance plans and are forced onto state health insurance exchanges, their eligibility for government subsidies would no doubt cause the actual cost of the bill to skyrocket. This would leave us even farther than before from lowering our country's health care costs, and reeling from the law's broken promises. Should businesses follow through with these more cost-effective plans, the promise "If you like your health care, you can keep it" would indeed be broken.

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