Small U.S. employers may be dropping health benefits partly because the Affordable Care Act premium tax subsidy system pushes employers to drop their coverage.
Brian Blase, president of the Paragon Health Institute, makes that case in a batch of written testimony he prepared for a Senate hearing.
Blase — an economist who served as a special assistant for economic policy during President Donald Trump’s first term in the White House — included a graph showing that the current ACA premium subsidies for people who buy their own health coverage through HealthCare.gov or another ACA exchange are much higher for most people who earn up to about 450% of the federal poverty level.
For a single, 50-year-old worker with income at 100% of the federal poverty level, or $15,650 in most of the country, the value of the ACA premium subsidy would be about $10,000, and the value of the tax exclusion for an employer offering the same worker group health benefits would be about $2,000, according Blase’s calculations.
If the 50-year-old worker had income at 300% of the federal poverty level, or $46,950, the value of the ACA premium subsidy would be about $6,000, and the value of the employer health benefits tax exclusion would be about $2,500.
If the worker had an income of 450% of the federal poverty level, or $70,425, the ACA premium subsidy and the employer health benefits tax exclusion would both be worth about $4,000.
“This subsidy design punishes work and penalizes employer-sponsored coverage,” Blase says in the written testimony.
Pushing workers in the ACA exchange system is a bad deal for the federal government, because the government spends an average of about $5,000 on subsidies per exchange plan premium subsidy user, and it loses an average of only about $2,500 in tax revenue per employer health plan participant, according to a Congressional Budget Office report Blase cited.
Blase appeared Wednesday at a hearing on health care costs organized by the Senate Finance Committee.
What it means: If the Blase analysis holds up, and some version of the current health insurance tax and subsidy rules stays in place, the analysis could help health plan administrators persuade more employers and more health insurers to maximize government subsidy support by shifting lower-paid workers into individual coverage health reimbursement arrangements and qualified small employer health reimbursement arrangements.
The cost problem: Blase argues in the written testimony that the ACA also hurts the efficiency of the U.S. commercial health insurance market by holding the typical enrollee’s share of the premiums to less than $80 per month.
Keeping the monthly bills for the enrollees too low means that they have little incentive to push insurers to hold down the full, unsubsidized cost of the coverage, Blase says.
“The subsidies go directly to health insurance companies, subsidizing their profits even though enrollees may place low value on the coverage,” Blase adds. “Insurers’ business models now revolve around securing federal subsidies rather than designing plans that consumers value.”
The other side: Defenders of the current ACA system for subsidizing consumers’ purchases of private health insurance say “Obamacare” was the only strategy for reducing the number of uninsured people that could get through Congress, and that the benefits to society of helping people get covered and get health care far outweigh the costs.
Health insurance and patient groups have found fault with some past Paragon analyses, such as those alleging that a high percentage of ACA exchange plan enrollees have lied about their income to maximize ACA premium subsidies.
Benefits groups and Paragon are not always in sync: In the past, Paragon analysts have suggested that the federal government should eventually try to limit the federal income tax exclusion for employer-sponsored health benefits, after addressing what they see as other forms of government-created health care system inefficiency.