The Affordable Care Act could save some of America’s largest corporations hundreds of billions of dollars over the next decade, according to a market analyst group.
According to a report by S&P Capital IQ released Thursday, S&P 500 companies will likely move their employees from employer-provided health insurance plans to the healthcare exchanges under the Affordable Care Act, saving employers nearly $700 billion through the year 2025. If current healthcare inflation stays constant, those savings could be greater than $800 billion, researchers found.
Corporations are expected to start out by dropping low-wage and part-time workers from their employer insurance plans since they are able to reap the benefits of government tax subsidies under ObamaCare, leading them to pick up new plans under the healthcare law. Eventually, the burden of healthcare coverage will shift from employers to employees.
The idea of dropping low-wage and part-time workers goes in the No Kidding file (with a 'Now They Tell Us' cross-tab). Dropping higher paid workers, for whom the tax shield provided by the current treatment of employer-sponsored coverage is valuable, is more surprising to me:
However, change is not expected overnight. The report says corporations will likely start of by shifting entry-level college graduates, low-wage workers and part-time workers to health insurance plans through the ACA since they are most likely to benefit from the new healthcare model first. Eventually, higher paid workers will likely be given stipends from their employers to pay for ObamaCare. But as they will not be able to keep up with healthcare inflation, the stipends will become part of their wage.
The report draws an interesting parallel to the decline of private pensions:
The report compares ObamaCare to the Employee Retirement Security Act of 1974, which led to the creation of Individual Retirement Accounts. The result was employees took ownership of their pension funds, leading employers to stop using their corporate pension structures and instead become contributors to the employees' pension plans.
To whoch I would add - I am not a tax laywer, but my recollection is that pensions were one of the few (if only?) tax-deferred savings schemes by which a company could, in effect, "pay" a worker today and deduct the compensation expense without the employee having to report the income. IRAs and 401(k)s were introduced as a complement, but eventually became a replacement.
From which one might infer that pensions were offered as a response to the tax code and decliend when the tax code changed; the ideas that they were popular, traditional, or a nice perk were secondary. Viewed that way, employer-sponsored insurance could go the same way, with employer-sponsored medical savings accounts leading the way. Consult your own tax advisor before relying on this:
Employee health savings accounts are employer-sponsored plans in which an employee puts money into the plan each pay period and can access the money only to pay for health care needs.
The Bureau of Labor Statistics says that there is no federal law limiting the amount an employee may contribute to her health savings account over a year or over a lifetime. However, individual employers can limit the amount of contributions employees may make to their plans.
If the only limit is that imposed by the employer and if the account can be used to pay health insurance premiums (per Wikipedia and the IRS, insurance premiums that should be allowed), a company can easily kick all of their employees onto the Obamacare exchanges and give them a tax-shielded payment to cover some or all of the premiums.
HMM: The Fiscal Times also covered this, employing the stale "dropping shoe" cliche but including a cool chart.