“Affordable” Pay Cuts for Obamacare

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It didn’t take long for the number of enrollees – 7.1 million – to be overshadowed by another figure – one less celebratory for the Administration. A new study, released by American Health Policy Institute, reveals some troubling news for large employers regarding the Affordable Care Act’s cost impact on their companies.

“[It] shows that large employers expect to face steep compliance costs, starting in the fall. Their cost estimates range between $4,800 and $5,900 per employee over the next decade. The total cost to large employers over the next decade will run between $151 billion and $186 billion, according to the 100 companies surveyed by AHPI that employ 10,000 or more people. That doesn’t include additional price increases from insurers attempting to cover bad bets in their 2014 premium rates after the first round of Obamacare.” [1]

Families and businesses, which have seen their budgets strained from the ailing economy, aren’t focused on how many have signed up. They are more concerned about how much it will cost them. From the analysis of this study, it’s not affordable.

Some employees like Mark in Ohio are already seeing how companies are preparing for the oncoming tsunami of costs related to Obamacare.

“Last September, my employer informed me and the rest of the company that we will now take a 2.5% pay cut because Obamacare is limiting the amount of money we can spend on salaries to less than 15% with all of our other business expenditures,” shared Mark.

If a salary reduction wasn’t bad enough, Mark also faces the burden of increased premiums.

“Additionally, there will be an increase in the premiums we pay for our healthcare insurance as well as an increase in out-of-pocket expenses until the insurance kicks in at the 80/20 level,” he stated.

With experience in the insurance industry, Mark believes the new healthcare law undermines the fundamental principles of how insurance rates are typically established.

“The basic premise has been blown away by the Affordable Care Act, because on the one end they want everyone to join, and on the other end they don’t let actuarial tables actually establish the rates that are being charged,” he explained.

The Wall Street Journal agrees with him. Last year, it pointed out how the disregard of “principles governing rational insurance pricing” in the past has wreaked havoc on individual-market premiums.

“Eight states—New Jersey, New York, Maine, New Hampshire, Washington, Kentucky, Vermont and Massachusetts—enacted guaranteed issue and community rating in the mid-1990s and wrecked their individual (i.e., non-group) health-insurance markets. Premiums increased so much that Kentucky largely repealed its law in 2000 and some of the other states eventually modified their community-rating provisions.” [2]

With Obamacare being governed under the same premise (guaranteed issues and modified community rating), it’s no wonder America is experiencing the same results. While the cut in pay and increase in healthcare costs are not going to financially break Mark yet, he’s concerned about how this will affect his family.

“I worry about my children and grandchildren because they will be more negatively impacted than I am. They are just starting their careers or partially into them,” he exclaimed. “Obamacare is not only wrong – there are factual reasons and mathematical reasons why it won’t work.”

 

Being fed up with what is transpiring in our nation, Mark has moved beyond picking up the phone to call Congress. He is now picking up petition papers to run for office in order to affect change.

 

Obamacare may not be lowing premiums for employees, but it’s increasing citizen activism in our political system.