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The Massive Costs of the Latest Obamacare Waiver

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Policymakers are still recovering from yesterday’s shocking admission by the Administration that it can’t implement Obamacare’s employer mandate without destroying jobs.

The announced one-year delay in enforcement brings with it an immediate revenue loss. But by further encouraging firms to drop coverage now—allowing businesses to privatize gains and socialize losses—the change could cause federal spending on Obamacare exchange subsidies to soar.

The Congressional Budget Office (CBO) estimated in May that the employer mandate would raise $10 billion in revenue in its first year. (Because the employer mandate is a tax penalty, firms will pay the penalties the following year—penalties for 2014 will be paid in 2015; penalties for 2015 will be paid in 2016, etc.) That $10 billion in employer mandate revenue projected for fiscal year 2015 will almost certainly disappear.

Then there’s the separate question of whether, when, and how employers will drop their health insurance plans and dump their workers on the exchanges. Here’s what we know on that front:

Over the past several years, numerous studies, papers, briefs, reports, employer questionnaires, consultant presentations, surveys, op-eds, interviews, quotes, and comments from Democrats suggest that employers will drop coverage in significant numbers, resulting in trillions of dollars of added federal costs. Even Jon Stewart, in an interview with Health and Human Services Secretary Kathleen Sebelius last year, would not believe that employers would keep offering coverage:

Is the penalty more than the [cost of] insurance?… Is there a consequence other than a fine or shame—cause I know the shame thing’s not gonna work.

Instead of facing a decision to pay more than $10,000 for a worker’s insurance policy or pay a $2,000 per-employee penalty, employers next year will now be able to raise their workers’ wages to compensate them for the loss of their health plans. And the cost of that choice—which some would argue is so obvious as to not be a choice—could result in skyrocketing federal spending.

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