This week, the New York Times reported that the overwhelming majority of entry-level employees are forgoing employer-based, mandatory insurance under the Affordable Care Act (ACA). For good reason.
These government-regulated plans often have high deductibles and expensive premiums even with employers covering most of the costs. Because employees who decline employer coverage are not eligible for subsidized health insurance on the ACA exchanges, many of them have chosen to forgo health insurance altogether and pay the associated fine for doing so – and in significantly greater numbers than the government originally forecast.
The Times profiles Billy Sewell, a franchise owner of 26 Golden Corral franchises in six states, who began offering health insurance to 600 of his service employees this year. So far, only two have signed up for his company health plan.
The unpopularity of plans offered under the employer mandate, which requires companies with 50 or more employees to offer health insurance to those who work 30 hours or more per week, isn’t exactly breaking news. Andy Puzder, CEO of CKE Restaurants, which owns Carl’s Jr. and Hardee’s, and member of the Job Creators Network, wrote a Wall Street Journal op-ed back in January making this very same point. Of his company’s 5,453 eligible employees, only 420 actually enrolled; the other 5,033 opted to pay the penalty.
And these aren’t just anecdotes. Insurance brokers are advising their clients that a one to two percent enrollment rate isn’t unusual. Single-digit sign up rates are the norm.
Health insurance through the employer mandate was supposed to be one leg of the three-legged ACA stool, which also includes a vast expansion of Medicaid and subsidized insurance offered through federal and state exchanges. Its wobbliness could bring the whole thing crashing down. The handful of employees actually signing up for health insurance are almost surely the sickest and oldest ones, risking the dreaded insurance “death spiral,” where only the most at-risk people sign up, increasing costs, and further scaring away the comparatively young and healthy who are needed for a robust insurance pool.
Reforming the ACA so it actually works is a gigantic task, but one direct solution to this employer insurance problem would be to reduce or reform the regulations around what makes a plan “compliant” with the law. This would allow job creators to offer lower cost, catastrophic insurance-only plans that actually make sense for employees, without all the currently required bells and whistles that drive up price. For instance, Andy Puzder writes that he offers all his employees – full and part time – access to cheaper group health insurance plans that are more popular. However, they are not ACA compliant.
The market should determine what type of insurance works for whom – not bureaucrats in Washington. As the lack of sign-ups among entry-level employees illustrate, government overreach can have unintended consequences that leave people worse off than before. Such market-based reform would be a big step toward allowing entry-level employees to acquire affordable health insurance – something that the euphemistically-named Affordable Care Act has evidently been unable to do.
Alfredo Ortiz is CEO and President of Job Creators Network