How Businesses Are Impacted by King v. Burwell

The American Action Forum (AAF) recently assessed the plausible effects of a ruling for the plaintiffs in the Supreme Court case, King v Burwell, concerning the legality of subsidies in the federally-run health insurance exchanges implemented under the Affordable Care Act (ACA). One outcome of such a ruling would be that medium and large employers in the 37 states with federal exchanges would no longer be burdened with the ACA’s employer mandate. The employer mandate requires all employers with 100 or more “full-time” workers (50 or more effective 2016) to provide their employees with health insurance. AAF previously assessed the labor market effects of the mandate and other regulations, finding that they have already reduced employment and weekly pay. To make matters worse, the ACA defines “full-time” as working 30 or more hours per week, which is nowhere close to reality in today’s labor market. As a result, all employers with 100 or more workers this year and 50 or more next year must be conscious of all their workers’ hours if they wish to avoid the employer mandate.

Inability to Understand Health Insurance Costs Consumers Hundreds of Dollars

Most people have a difficult time fully understanding their health insurance coverage, resulting in financial loss. The inability to accurately evaluate the various cost-sharing mechanisms leads many people to select a financially-dominated insurance plan—a plan which, given the premium and cost-sharing amounts, is economically suboptimal. For instance, spending $625 more in annual premium costs for a $500 lower deductible is economically irrational; yet, as shown below, the majority of people make that kind of mistake. A recent report analyzes the costs which result from these suboptimal choices. While people consider many factors besides cost when selecting health insurance, most of these preference differences were eliminated in this study and the problem persisted: 55 percent chose a financially-dominated plan.  The average savings which could be achieved by switching from various dominated plans are shown.

Obamacare Exchange Subsidies Were Over Generous

Because the subsidies are estimated and paid in advance based on income data from two years prior, many individuals received incorrect amounts and had to reconcile those errors when they filed their taxes this year. For the roughly two-thirds of subsidy recipients who had to pay money back, the average repayment was $729, according to a recent H&R Block report. Given the average premium and subsidy amount before these errors were reconciled, this repayment equates to an increased premium cost of 75 percent for these individuals, leaving only 58 percent of their plan premiums covered by the subsidy.

Loading more entries