How Obamacare Helps Employers Game the System

When big, important laws like
Obamacare are debated and discussed after the fact, you typically
hear a lot about what will happen under the
law. But fairly often, descriptions of what will
happen are actually just descriptions of what someone
hopes will happen, or perhaps
intends to happen.

For example, think of the law’s “employer mandate.” Prior to the
health law’s passage in 2010, and in the years since, we heard
quite a bit about what the provision would do. The reality turns
out to be somewhat different.

In 2009, for example, President Obama explained that, under the
law, “businesses will be required to either offer their workers
health care, or chip in to help cover the cost of their workers.”
Employers, he
argued, needed to do their part. “We can’t have large
businesses and individuals who can afford coverage game the system
by avoiding responsibility to themselves or their employees,” he
said.

In a speech last year, Obama
explained the provision again. He also responded to a possible
objection about the employer mandate.

“Now, some folks say, well, that’s not fair,” Obama said. “But
if you are an employer, you can afford to provide health insurance,
you don’t, your employees get sick, they go to the emergency room
or they end up on Medicaid because you’re not doing what you’re
doing—you should be doing—why is it everybody else should be
bearing those costs?”

That’s a good question. Obama might want to dwell on it a little
bit further—because, as it turns out, some employers appear to be
responding to the mandate by finding ways to enroll employees in
Medicaid coverage.

As The Wall Street Journal
reports today, benefits consultants are instructing large
employers about ways to avoid both penalties for not providing
coverage and the cost of coverage itself. 

The Medicaid option is drawing particular interest from
companies with low-wage workers, brokers say. If an employee
qualifies for Medicaid, which is jointly funded by the federal
government and the states, the employer pays no penalty for that
coverage.

And when that happens, as Obama said, “everybody else” ends up
bearing those costs.

…Such maneuvers could fuel controversy. Big employers with
significant Medicaid enrollment in their workforces have been a
political flash point in some states. The health law aimed to
expand Medicaid eligibility to most people with incomes at or below
138% of the federal poverty level, but not all states have adopted
that standard.

“We’ve got to be careful about not fooling ourselves into
thinking everybody wins,” said Matt Salo, executive director of the
National Association of Medicaid Directors. “The cost to the
taxpayer does go up significantly.”

BeneStream said its business is growing rapidly. “The economics
of this are what’s driving change,” said CEO Ben Geyerhahn. The law
“created this as a valid waiver” for employers.

In addition, the Journal reports that employers are
also finding ways to offer “skinny” health insurance plans that
meet the health law’s requirements but offer narrowly limited
coverage.

The point is this: Here we have a requirement that was sold on
the basis that it would force employers to chip in for worker
coverage, that it would keep employers from shifting costs onto
taxpayers via Medicaid, and that it would prevent employers from
gaming the system. Instead, it is doing the exact opposite of all
of these things. The law is creating an opportunity for employers
to avoid paying for coverage by shifting them onto Medicaid. It is
helping employers game the system. 

That’s not what was intended to happen. But it’s what is
actually happening.