Republican Senator Ted Cruz of Texas, who was the public face of the Tea Party-backed campaign to stop the implementation of the Affordable Care Act, popularly known as Obamacare, has taken a great deal of criticism for the manner in which he opposed the health care reform and insulted his own party. However, the bigger problem may be that his numerous public tirades against the law employed some dubious facts.
“Well, if you don’t believe ObamaCare is the biggest job killer in the country, look to the facts. This year report after report has rolled in about employers restricting work hours to less than 30 hours per week — the point where the mandate kicks in. The data also points to record-low workweeks in low-wage industries.
“It is low-wage industries in particular because the people who get hammered by this are not the CEOs. It is not the rich. The rich have done just fine under President Obama. It is hard-working American families, the people who are struggling. It is young people, Hispanics, African Americans, and single moms. They are the ones who are losing their jobs and being forced to work 29 hours a week.” Cruz, speaking on the Senate floor, September 24, 2013.
“The U.S. Senate is not concerned about all of the people who are out of job, all the people with part-time work, all the people whose health insurance premiums are skyrocketing, all the people who are losing their health insurance. And that’s happening because of Obamacare.” Cruz, interview with ABC News, Oct. 17, 2013.
“The deal that has been cut provides no relief to the millions of Americans who are hurting because of Obamacare. People all over this country are losing their health insurance. 15,000 UPS employees got a notification in the mail that they were losing spousal coverage, that their husbands and wives were all losing the health insurance that they wanted and they liked. That is happening all over the country.” Cruz, speaking to reporters, Oct. 16, 2013.
Cruz does highlight some important points — the rollout of Obamacare is not progressing smoothly. Some Americans who have enrolled in the health care law’s online marketplaces have seen their health insurance premiums skyrocket, while others were unable to keep their current health insurance plan as President Barack Obama had promised. But the issue is that the Senator continually describes these problems in hyperbolic terms, making it necessary to analyze his claims that “millions of Americans are hurting” and Obamacare is “the biggest job killer in the country” in order to make sense of his assessment. Just as Cruz suggested in his speech on the Senate floor, it is time to look at the facts.
1. “Millions of people are hurting because of Obamacare”
First, it is important to remember that less than three weeks of the six month enrollment period for the online marketplaces have elapsed, and while anecdotal information has trickled in about increasing premiums, a full scale assessment of how the health care reform has changed the individual market is months, if not years, away. In the absence of that full scale assessment, projections made by the Congressional Budget Office will have to suffice.
In May 2013, the nonpartisan federal agency calculated that by 2018, at which time the law will be fully implemented, about 7 million people will be dropped from their employer health plans, 5 million people will shift out of private plans, and 24 million people will join the insurance exchanges. In terms of percentages, those numbers work out to coverage changes for 4 percent of all individuals with employer-based insurance and 19 percent of all individuals with private insurance. Comparatively, the CBO estimates that the number of Americans without coverage will fall by 25 million, a decrease of more than 45 percent. For reference, the population of the United States stands at 315 million.
The fact that more Americans will be helped by the implementation of the Affordable Care Act is an important detail for any argument, even if it is ultimately found that the law was poorly designed and implemented, especially because a majority of those who receive insurance from their employers will likely see little change in their coverage. The specific example cited by Cruz — the “15,000 UPS employees got a notification in the mail that they were losing spousal coverage” — left out an important detail as well. According to the company memorandum, the policy change will only affect spouses who are eligible for insurance provided by their own employers.
2. Obamacare is “the biggest job killer in the country”
Again, there is not enough data to argue for or against that statement. Cruz’s argument is that the employer mandate, the Obamacare provision that requires businesses with 50 or more full-time employees to provide those workers with a minimum level of health insurance coverage or face tax penalties, will cause employers to shift employees’ schedules so that they will no longer be considered full time or layoff workers entirely. There is also the concern that employers will choose to hire more part-time workers rather than full-time workers.
While there is evidence to support the claim that the Affordable Care will modestly affect employment in the United States, the claim that the reform is a “job killer” is overblown. It is true that a few nonpartisan economic analyses have estimated that a small number of primarily low-wage positions will be cut as employers prepare for the additional labor costs added by Obamacare’s employer mandate to business’ balance sheets. But economists expect the impact will be minimal.
The original source of the concern for job loss was a 2010 report from the nonpartisan Congressional Budget Office, which said the Affordable Care Act would have a small effect on employment, “primarily by reducing the amount of labor that workers choose to supply.” That fact, which the Republican party translated into a loss of actual jobs, was actually meant to imply that individuals may choose to work fewer hours if they receive subsidies to help buy insurance or retire early if close to retirement because insurance will be less of a financial burden. This decrease in the amount of labor in the economy would amount to one-half of 1 percent, according to the report.
CBO also said that the employer requirements “will probably cause some employers to respond by hiring fewer low-wage workers,” but companies may hire more part-time or seasonal workers instead. Hard evidence shows that employers are turning to part-time workers because of the economic situation, not necessarily Obamacare.
Duke University/CFO Magazine Global Business Outlook Survey polled 530 chief financial officers of United States-based companies last month, and found that 59 percent of the respondents said that they have increased the proportion of their workforce made up by temporary and part-time workers or shifted toward outside advisors and consultants. Of those, 38 percent attributed the shift to the implementation of the Affordable Care Act, while another 44 percent said it was because of extreme economic uncertainty.
But it is important to remember that companies that do not now provide insurance, but will soon be required to, probably employ around one percent of American workers. “You’ve got 5.7 million firms in the U.S.,” Mark Duggan, who served as the top health economist at White House’s Council of Economic Advisers from 2009 to 2010, told the Washington Post. “Only 210,000 have more than 50 employees. So 96 percent of firms aren’t affected. Then if you look among those firms with 50 or more employees, something on the order of 95 percent offer health insurance. So it’s basically 10,000 or so employers who have more than 50 employees and don’t offer coverage.”
3. “Health insurance premiums are skyrocketing”
Similarly, Republican Senator Rand Paul of Kentucky during his brief cameo in Cruz’s Senate Speech: “We went through this whole debacle of giving people Obamacare and it is going to be expensive. Everybody is going to pay more. Many people still will not have insurance. The ones who do have insurance are going to pay more.” How much an individual’s insurance costs will change because of Obamacare depends on a whole host of factors. It depends on age, current health status, state of residence, and of course, whether the individual (or family) was insured before purchasing a policy via the Obamacare-mandated insurance exchanges.
For example, those who are uninsured and have a preexisting condition will likely pay less for coverage than they would in the current private market. Without accounting for subsidies, those who are uninsured but young and healthy will likely pay more; those who are insured through their employers will likely experience few changes; and some 13 million Americans who are currently uninsured will pay little to nothing because they will become eligible for Medicaid. Plus, a vast majority of those buying plans on the individual exchange — 80 percent, according to the Congressional Budget Office, will receive subsidies of varying amounts to make insurance more affordable.
In general, exchange premiums also reflect insurers’ estimates of the cost of offering the new benefits to people: the plans offered on the exchanges must meet certain regulatory requirements, surcharges based on health status will be eliminated, premium variations based on age will be limited, and the three-year long, $10-billion reinsurance pool will theoretically insulate insurance costs from the shock of offering coverage to those previously uninsured customers or those who were enrolled in high risk plans.
As for states, premium increases can vary not only because each exchange has attracted a different number of insurers, but because states have regulated the insurance market for more than one hundred years and have developed different standards. For example, insurers operating in New York were not allowed to sell so-called bare bones plans, meaning that to adjust these plans to comply with Obamacare standards, which require insurance to cover a minimum set of benefits like maternity leave and mental health, insurers had fewer changes and fewer costs to add.
Plans are no longer able to charge more based on health status or gender, but they can vary based on geography, tobacco use, and age. Still, Obamacare regulations prohibit insurers from charging an adult 64 or older more than three times the premium charged a 21-year-old for the same coverage. Younger adults, who are less risky to insure, will likely see the greatest increases because their premiums are meant to balance out the medical costs of those older and sicker insurance consumers who are more likely to use their benefits.
An August 2013 RAND study, sponsored by the Department of Health and Human Services and the Centers for Medicare & Medicaid Services, calculated that there would be “no widespread trend toward sharply higher prices in the individual market.” Rather, rates would likely vary from state to state and based on individual circumstances.
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