The primary purpose of the Affordable Care Act was to make health insurance affordable for people with modest incomes. Yet as the employer mandate begins to kick in for 2015, the law is already hurting some of the people it was intended to help. By this time next year, we may find that many workers who earn within a few dollars of the minimum wage have less income and less insurance coverage (as a group) than they did before the mandate began to take effect.
This is the conclusion I draw from my survey in December of 136 fast-food restaurants (franchisees) that employed close to 3,500 workers. Before 2014 about half the employees were full time as defined by ObamaCare; that is, they worked 30 hours or more a week. The potential cost to the employers of providing mandated health insurance to their full-time staff would have been about $7 million a year. But by the time the employers took advantage of all their legal options they were able to reduce their cost to less than 1% of that amount.
The first step was to make all hourly workers part time. That may seem easy to do, but in the fast-food business its not uncommon that employees fail to show up for work. Other employees are asked to work additional hours to prevent the restaurant from shutting down. By the end of 2014, 58 employees had crossed the line to full-time status and were eligible for mandated health insurance in 2015.
The companies offered these employees ObamaCare-compliant health insurancebronze plansbut asked them to pay the maximum premium the law allows: 9.5% of their annual wage. For a $9-an-hour employee working 30 hours a week, the maximum monthly premium was $111. The total premium was $367, and the law requires the employer to pay the difference.
The bronze plan has very large deductibles and copaymentsup to $6,600 or $13,200 for a family, depending on the familys income. But the designers of the Affordable Care Act apparently did not understand that high deductible health insurance with no Health Savings Account is not attractive to young, healthy, low-income workers. They are far more likely to prefer mini-med plans that pay for generic drugs and doctor visits but not catastrophic care.
Before ObamaCare, these companies offered all full-time, hourly employees a standard Blue Cross health plan as well as a mini-med plan for a much lower premium. No one signed up for the Blue Cross plan. About 200 signed up for mini-med insurance.
Self-insured employers can still do something similar. They can offer a Minimum Essential Coverage (MEC) planbasically a type of mini-med insurance that covers preventive care with no annual or lifetime limits and very little elseno hospitalization, no specialist care, etc.
Employees who sign up for MEC coverage escape the Affordable Care Acts fine for being uninsured. Employers also are off the hook for any fine in this case because they offered all full-time employees a bronze plan, even if the employees turned it down.
The companies in the survey offered to pay the full premium for the mini-med plans, in order to make that alternative more attractive. If employees choose the bronze plan it costs the employers about six times as much.
The result: Only one of the 58 remaining full-time employees enrolled in a bronze plan; the rest will likely be in MEC plans.
What about the families of these workers? Employers dont have to pay the premiums for coverage of dependents. So to cover a family of three, the employee in one of these restaurants can face a premium of $805 a month for a bronze plan, almost 70% of his monthly wage. Since ObamaCare considers this offer affordable, any family member who turns it down is ineligible for premium subsidies on an insurance exchange.
What about the mini-med plans? Although these plans are offered free to the employees, dependent coverage is not free. An employee has to pay about 25% of his income to cover a spouse and kid. If he doesnt, the family faces a fine next April 15.
Lets return to the workers in the survey whose hours were reduced to part time. They can get subsidized insurance through an exchange, but they will be asked to pay up to 9.5% of their income for what is unattractive coverage. Some of them previously had mini-med plans, but this kind of insurance is no longer available to them.
To recap: Almost half the workforce of these restaurants was involuntarily reduced to part time and has less income as a result. These employees have also lost the opportunity to have the coverage they most prefer: mini-med plans that pay for medical care they are most likely to need.
Those few remaining full-time employees will get mini-med insurance for themselves, but they are unlikely to be able to afford coverage for any dependents they have. They will not get an ObamaCare bronze plan unless they fork over about one-tenth of their take-home pay, and they wont be able to get bronze coverage for other family members unless they forfeit more than half their income.
Out of 3,500 employees, only one that we know of got the kind of insurance that the architects of the Affordable Care Act wanted everyone to have.