ObamaCare's Losers: Full-Time Workers

Monday, November 23, 2015

Who gets the worst deal from ObamaCare? It's no contest: A few million modest-wage workers — and their spouses — can't qualify for exchange subsidies but many will owe a $695 penalty.

They're full-time workers for companies that offer health insurance that meets ObamaCare's dubious "affordability test."

Consider single workers earning $17,500, or 150% of the poverty level. For such workers, bronze-type coverage with a $5,000-plus deductible is deemed affordable in 2015 even if it costs $1,670 — just under 10% of income. That's 15 times the $9 a month or less it costs workers at the same income level to buy subsidized bronze-level policies via

Here are three key points about this clearly unequal treatment:

Exacerbating Income Inequality

First, for many modest-wage workers, the ACA makes income inequality worse. The $695 penalty for failing to buy coverage will amount to a pay cut of 4%, or 33 cents an hour, for these $8.42-an-hour workers.

Dodging the Employer Mandate

Second, many employers have figured out they can keep a lid on health insurance costs and still dodge the ACA's employer mandate penalty by offering "affordable" coverage that modest-wage workers find unaffordable. That's a big reason why the employer mandate, though it's had a clear negative effect on low-wage work hours, hasn't been nearly as big of a problem as some feared.

But trading one negative consequence for another should provide little solace to supporters of the law, which was after all intended to ensure affordable care.

Andy Puzder, CEO of Carl's Jr. and Hardee's parent CKE Restaurants, says that just 420 of 5,453 full-time workers offered a $5,500-deductible plan were willing to pay the $1,116 premium. The New York Times reports that insurance take-up by fewer than 10% of low-wage workers is commonplace.

Wendy's initially expected its health insurance tab to jump by $25,000 per restaurant, but cut that to $5,000 after finding few interested employees.

Working Poor Aren't Enrolling

Third, these uninsured full-time workers are hardly an exception. The ACA has, so far, failed to provide affordable care to a clear majority of modest-income individuals at 150% to 250% of the poverty level. Barely 1 in 4 in this income range who lack comprehensive employer coverage are getting silver-level exchange plans that carry more-or-less reasonable deductibles. That's based on an IBD analysis of enrollment data and multiple studies about the remaining uninsured population.

While roughly three in four in this income range who have enrolled in exchanges chose silver plans, most people have yet to enroll. That shouldn't be a surprise. Generally, if people can't afford to pay silver-plan premiums — $1,500, or 6.4% of income, for a single earning $23,500 or about 200% of the poverty level — they won't be able to afford to pay bronze-plan deductibles of up to $6,850.

The Obama administration has noted that among the uninsured, about 80% have only $1,000 in savings. If landing in the hospital will torpedo their finances anyway, many may see no compelling reason to sign up for bronze — except for the mandate penalty.

By the end of September, paid exchange enrollment had dwindled to about 9.5 million, down from 11.7 million who selected plans at the start of the year. Now, there are roughly 2.7 million individuals with income between 150% and 250% of the poverty level with silver coverage, but that compares to a potential market in the neighborhood of 10 million, if full-time uninsured workers were included.

The Kaiser Family Foundation estimated that 4.9 million uninsured are ineligible for exchange subsidies due to an offer of employer coverage. The Urban Institute analysis implies about 3.25 million uninsured are in this boat.

Skinny Plans Preferable To Penalty?

Neither tally includes a very rough estimate of one million modest-wage workers who have "skinny plans" that don't reimburse for hospitalization or surgery — exactly the kind of coverage ObamaCare was supposed to outlaw. Yet such plans may cover a doctor's visit and preventative benefits, making them preferable to paying a $695 penalty. Many employers are offering both types of plans, a more costly one that meets the definition of "affordable" and a skinny fallback option.

Oddly, ObamaCare has two sometimes contradictory definitions of "affordable." One, for employer plans, says coverage is affordable in 2016 if it costs no more than 9.66% of income, which means employees can't access exchange subsidies. The other says individuals should be granted a waiver from the individual mandate if the cheapest coverage available to them costs more than 8.13% of income. But that still means a $17,500 earner offered a $1,400 employer plan would have to buy it or face a penalty.

To add insult to injury, the American Action Forum estimates that one million spouses are ineligible for exchange subsidies because they are married to someone with an offer of affordable employer coverage.

While many people who get large subsidies via ObamaCare may be worse off under Republican plans, this group of several million full-time workers and their spouses could see an immediate gain under GOP proposals to provide a standard, age-adjusted tax subsidy that one could use to buy coverage either through an employer or via the individual market.

                This article was originally posted at