Will companies drop health insurance plans and pay the penalty?

In a GQ thread on Obamacare, Mdcastleman stated that there are companies considering dropping employee healthcare coverage and paying the penalty instead.

Do you think this will be a popular approach after the exchanges are up and running?

Does it make good business sense?

How would you react if your employer told you to go buy your own insurance?

I read somewhere recently that some companies will react by using more part-time employees. Apparently Obamacare does not require employers to provide insurance for employees that work less than 30 hours per week.

I’ve seen that , too- except most of what I’ve seen talks about food service and retail companies doing this and those businesses already tend to either keep most employees under 30 hours per week or have fewer than 50 employees.
But I can’t see why an employer that currently offers coverage would decide to drop it and pay the fine.Presumably they offered the coverage for a reason to begin with- to keep employees happy, to attract a better class of applicant, whatever - and those reasons won’t suddenly disappear.

If the cost of insurance on the exchange plus the penalty is less than what the employer pays for insurance, wouldn’t the employer be just as well off to give the employee whatever the exchange charges and tell the employee to buy their own insurance?

The cost of insurance isn’t going to disappear either, and companies will have to weigh whether it’s worth these benefits to them to provide it. The cost of group policies might even go up because healthy people that are offered it already tend to take it, so there’s nothing to offset the elimination of pre-existing conditions and lifetime maximums, and pushing the other directions there’s a tax on Cadillac plans discouraging companies from luring top level employees by offereing generous health plans. Again, I can’t provide a cite because it was a propretary company memo, but some large companies (including a very, very large one in telecomunications) are thinking about dropping coverage. The difference now is they can tell their employees there’s no need for them to offer coverage since individual policies can now be bought affordably on the exchanges.

I wouldn’t worry about it - my sister’s brother’s husband told me that he saw a memo saying that his company was going to buy everyone health insurance, so it’s all going to work out.

Yes, those who are dropping their already generous coverage are using this as an excuse, not a reason.

This may or may not be true for those who are cutting or trimming the hours of workers. Witness the coal executives who fired people blaming it on Obama’s reelection when they were planning on firing them anyway. But the few who are dropping health insurance either are misinformed/ignorant, or are making excuses.

Now, if I had a business and there was actual universal health care in place, I might drop my health insurance at the same time as raising my employees salaries to half the difference between my cost and the cost of universal health care. Win-win (except for those who would be benefitting from my Cadillac plan.)

That’s not correct. There are a lot of big supermarket and other chains for whom this is very relevant.

The reasons will be lessened significantly.

As it stands now, it’s very hard to get coverage on an individual basis. This means that most people, especially those with families, simply will not accept a job that does not offer health coverage. So the companies have to offer it, whether they like it or not. Once the exchange provides an alternative form of individual coverage, it will be a lot easier for companies who don’t offer coverage to attract employees, and there’s no doubt that many will try it.

You’re making an assumption that has no basis.

The stocks of energey companies in general, and coal companies especially, tanked on the day after the election. So the idea that Obama’s election is bad for coal companies is the conventional wisdom, and this is not about some coal companies trying to score points.

I assume this is a joke. But it’s worth noting that a lot of companies who currently intend to keep offering coverage are apt to change their minds, if the ball gets rolling.

I know someone who was on a conference call with an industry group about a year ago discussing this issue. He said the sentiment on the call was that “everyone wants to be the second company in the industry to drop coverage, but no one wants to be the first”.

My expectation is that severely financially strapped companies will lead the way in dropping coverage. From there it will snowball.

[This is mostly based on the assumption that the exchanges are actually viable. If they’re not, that would impact this somewhat.]

Big chain stores may have more than 50 employees but if most of them work fewer than 30 hours a week, it’s still not very relevant. Some companies do this specifically to avoid providing benefits , as their own policies provides benefits to those working over 30 hours and others do it so they have a pool of employees who can be called upon to cover absences etc without running into overtime. And depending on what kind of chain it is and how they are set up, some chains may not have more than 50 employees- it’s not unheard of for each location to be a separate corporation and therefore a separate employer.

Plenty of people have to accept any job they can get, with or without coverage. That’s why there are currently companies that don’t offer coverage , and the ones that do presumably offer it to attract or keep better employees.

Some companies will in the short term.

In the long term, I believe that they will find that the world did not end, that other companies are doing just fine, and that they’re the ones having issues recruiting and retaining good people by failing to offer health insurance.

There are a lot who don’t.

And there are also many who have employees whose time can vary from month to month. These companies are going to try to make sure they stay under 30.

“Plenty of people” is not enough.

The point is that there is a big differential between the cost/benefit equation for a company looking to attract and retain employees when there is no realistic alternative to employer health coverage and the cost/benefit equation when there is one.

The fact that there are “plenty of people” available in any event doesn’t change this.

There’s a lot of unskilled and underpaid people. I really doubt those people are holding out for a great job and benefits. The ball could be in the company’s court. There is a large pool of people willing to work for no benefits.

Define “tanked.” They’re [not really down that much](http://www.google.com/finance?chdnp=1&chfdeh=0&chdet=1352762304619&chddm=49266&cmpto=NYSE:ACI;NYSE:BTU&cmptdms=0;0&q=NYSE:ACI nyse:btu&ntsp=0&ei=rIOhULiLBIWmqQHnbg).

Anyway, any company that contemplates executes layoffs based on a (so far) short term 15% dip in the stock price is so incredibly poorly run that their fundamental value is probably garbage, too.

And furthermore, don’t coal companies have a highly unionized workforce in a high risk pool, anyway? How is the ACA supposed to substantially change their health care costs?

I think you’re the one who’s making baseless assumptions.

Anyway, I’m a direct report to the owner/CEO at a small company staffed by educated, talented professionals. We’re rapidly closing in on 50 employees, and we’re not planning on dropping coverage any time soon. My boss voted for Obama.

It’s a popular argument against Obamacare, but consider this; companies that provide health insurance do it to attract and keep the best employees. They won’t stop it to save money.

Employers have been dropping coverage due to the cost. I think in the early 90s about 75% of jobs offered health coverage. That number has been declining, I think it is only about 50% now (maybe 56% around 2000).

So there is already a trend line of employers dropping coverage as coverage goes up in cost and the labor market becomes glutted with talent which reduces the incentive of employers to offer benefits to keep people on.

When they tried Obamacare/Romneycare in MA, employers didn’t drop coverage.


Part of me wonders if it’ll help small businesses promote coverage. For one thing there are small business tax credits in the health care law. For another, with larger pools maybe the rate of insurance increase will not go up so drastically. Where I work (at a small business) the insurance rates have gone up 30-45% every year for the last few years despite health care costs only going up 3-5% a year. So with a larger pool maybe the rates won’t go up so fast. This will incentivize small businesses to buy and keep insurance. Assuming that is how it works (it reduces the rate of health insurance inflation to something more reasonable).

Except that there is a realistic alternative now. There are employers who provide no health coverage, but they still manage to have employees. There are others that cover the employee only, not dependents, and they still have employees. There are others who aim to keep employees hours under the number to be eligible for coverage under the employer’s own policies, and yet they have employees. Why aren’t these jobs going unfilled if


Maybe in your world people can afford to turn down a job because it doesn’t offer health coverage. In my world, hundreds of people line up for hours to get applications when there are only ten or twenty jobs available. ( And no, I’m not one of them, but people applying for jobs at Target and UPS exist in my world. Maybe you just don’t notice them)

A few companies might use this an excuse to drop coverage, but unless every employer in a given industry/area drops coverage , the ones offering coverage will get the more desirable applicants. And therefore, there will always be some that either offer coverage or at least cover a high percentage of the cost of the employee going through the exchange (which from the employee’s standpoint is no different that any other employer subsidized health coverage)


You want to attract…and keep…the best employees you can find. Turnover costs will kill you. Losing the productivity, the experience, plus having to train someone new and hope they are not a flake…

Without benefits, it would be hard to keep good people.

In fact, my current employer does not offer health insurance, so we must either purchase our own or go without.

In other words, I already live in that world.

If you were wondering, I participate in a state-subsidized program to get my health insurance. I hasten to add this is not some sort of free-loader “welfare” as I most certainly am required to contribute towards the premiums on a monthly basis. While I, personally, have no objection to the notion of providing health care to the poor I realize some people feel differently.

What is left out of this argument is that companies already don’t provide insurance (as posted above, I think it is less than 50% at this point?). Those companies are free-riding off the US Tax Payer who picks up the bill for ER visits and certain other medical expenses. It is about time that they get fined for free-riding off the public. Other companies who provide health insurance for their employees have to cover those costs (reduce profits) so why should these cheap low-life companies get a free ride any more?

I personally would like to see a penalty that is directly based on how much is spent to cover uninsured patient costs. All they have to do is divide the total cost of uninsured expenses by the total number of patients. Then set the penalty equal to that for every uninsured worker. The net profit can go to medicaide/SSI to cover the disabled.

If companies don’t like it, then they can close up shop (like no one else is going to try to fill their space in the market) or provide health insurance.

Coal companies are tanking because of natural gas. Companies like Chesapeake want electricity producers to make the switch because right now the price of natural gas is in the basement. The US and Canada combined are sitting on massive butt loads of capped wells because there are not enough consumers to drive up the price.