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What Massachusetts tells us about employers and health-care reform

Tennessee Gov. Phil Bredesen has long been a controversial figure in health-policy circles, and today he took to the Wall Street Journal to argue that the new health-reform law will, contrary to the Congressional Budget Office's expectations, unravel the employer-based insurance market. Health economist Jonathan Gruber is skeptical, and with good reason: We've actually seen this movie before.

CBO projections aren’t perfect, of course. But this particular projection is consistent with the best evidence we have--evidence that, once again, Bredesen completely ignores. In 2006, the state of Massachusetts put in place a system much like the one the Affordable Care Act will create nationally--with subsidies for low income groups (subsidies that are even more generous than those in the Affordable Care Act) and an individual mandate, but without the small group tax credit or meaningful penalties on firms that don’t offer insurance. The result? Employer-sponsored insurance has risen in the state by more than 100,000 persons.

Gruber also runs some of Bredesen's calculations again and comes to some very different results. The whole thing is worth a read, as it also serves as a useful primer on the complexities and regrettable resilience of the employer-based health-care system.

By Ezra Klein  | October 21, 2010; 5:30 PM ET
 
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Comments

Democratic Gov. Phil Bredesen knows from personal experience with TennCare that the health insurance model that is failing in MA will fail across the country now that the Democrats in congress are imposing it on everyone.

Posted by: RightKlik1 | October 21, 2010 7:12 PM | Report abuse

"Jonathan Gruber is skeptical," yet could find no publication other than TNR which would publish his own analysis purporting to prove the superiority of his own prior estimates.

The phrase "heavily subsidized" appearing repeatedly in the Governor's opinion is significant: if the PPACA is not funded at the anticipated level, the scheme collapses. Even if patriotic organizations (such as http://www.DefundIt.Org) are unsuccessful in directly blocking PPACA funding, the general lack of funds will likely impact the PPACA, leaving employees stripped of their previous plans with few viable alternatives.

In reality, implementation of the PPACA must be halted -- by whatever means necessary -- before the problems it induces spread too far. Remember, the same folks who failed to correctly assess the most recent mortgage crisis are the same folks attempting to implement the PPACA: we can delay a foreclosure or two while we figure out the issues... but can't delay a heart attack so that Sebelius can ponder the political ramifications of treatment.

Posted by: rmgregory | October 21, 2010 7:30 PM | Report abuse

The Europeans I know share pretty much one thing in common...they cherish their private, employer sponsored health insurance. No matter how proud they may be of their public healthcare, they draw the line at actually having to use it.

Posted by: bgmma50 | October 21, 2010 9:04 PM | Report abuse

In addition to all the logic flaws in Gruber's argument, the claim of a rise of 100,000 people covered by "employer sponsored" insurance is not accurate according to the state's own data (see slide 4 in the Mass Department of Healthcare Policy and Finances most recent quarterly report -- http://www.mass.gov/Eeohhs2/docs/dhcfp/r/pubs/10/key_indicators_may_10.pdf -- which is always months late for some reason). There is only an increase of 26,000 total since 2006 in the private group category (the one employers would offer) and enrollment in that category is down 100,000 from the peak in 2007. In other words, Massachusetts is seeing just the churn away from employer-sponsored insurance that is going to happen nationwide with Obamacare.

Posted by: byrondennis | October 21, 2010 9:21 PM | Report abuse

In addiion to the bad reasoning of Mr. Gruber, the rise in 100,000 people insured by empolyer sponsored plans is not accurate according to state of Massachusetts data (see slide 4 in http://www.mass.gov/Eeohhs2/docs/dhcfp/r/pubs/10/key_indicators_may_10.pdf, the most recent Key Indicators Report). The category "private group," which is where you would find employer-sponsored insurance has only grown by 26,000 since the beginning of the program in 2006 and is in fact down 100,000 from the peak in 2007. He's got bad data or old data or is just making it up.

Posted by: byrondennis | October 21, 2010 9:28 PM | Report abuse

Is Gruber still taking government money to push the government line?

http://voices.washingtonpost.com/ezra-klein/2010/01/jon_gruber.html

Posted by: msoja | October 21, 2010 11:51 PM | Report abuse

Klein: "[Gruber's] government contract should have been disclosed to me, and in the future, when I quote Gruber, it will be disclosed to you."

Were you talking full disclosure, or just maybe no disclosure?

Has Gruber been rehabilitated? Or is he such an asset to the party that his transgressions have been airbrushed out of things?

Posted by: msoja | October 21, 2010 11:57 PM | Report abuse

Mortgage refinancing means re-funding the mortgage loan with better terms as well as conditions, most likely from a different lender. It is one way to save money. Search online for "123 Mortgage Refinance" they found me 3.1% refinance rate and also gave free analysis of my mortgage.

Posted by: alexischarles22 | October 22, 2010 4:30 AM | Report abuse

Employer-sponsored insurance has risen in the state by more than 100,000 persons. He left out that the employer is the STATE!

Posted by: obrier2 | October 22, 2010 8:41 AM | Report abuse

This is pretty much the same analysis that John Cassidy had in the New Yorker.

"The question of what impact the reforms will have on existing insurance plans has received even less analysis. According to President Obama, if you have coverage you like you can keep it, and that’s that. For the majority of workers, this will undoubtedly be true, at least in the short term, but in some parts of the economy, particularly industries that pay low and moderate wages, the presence of such generous subsidies for individual coverage is bound to affect behavior eventually. To suggest this won’t happen is to say economic incentives don’t matter.

Take a medium-sized firm that employs a hundred people earning $40,000 each—a private security firm based in Atlanta, say—and currently offers them health-care insurance worth $10,000 a year, of which the employees pay $2,500. This employer’s annual health-care costs are $750,000 (a hundred times $7,500). In the reformed system, the firm’s workers, if they didn’t have insurance, would be eligible for generous subsidies to buy private insurance. For example, a married forty-year-old security guard whose wife stayed home to raise two kids could enroll in a non-group plan for less than $1,400 a year, according to the Kaiser Health Reform Subsidy Calculator. (The subsidy from the government would be $8,058.)

In a situation like this, the firm has a strong financial incentive to junk its group coverage and dump its workers onto the taxpayer-subsidized plan. Under the new law, firms with more than fifty workers that don’t offer coverage would have to pay an annual fine of $2,000 for every worker they employ, excepting the first thirty. In this case, the security firm would incur a fine of $140,000 (seventy times two), but it would save $610,000 a year on health-care costs. If you owned this firm, what would you do? Unless you are unusually public spirited, you would take advantage of the free money that the government is giving out. Since your employees would see their own health-care contributions fall by more than $1,100 a year, or almost half, they would be unlikely to complain. And even if they did, you would be saving so much money you afford to buy their agreement with a pay raise of, say, $2,000 a year, and still come out well ahead."

http://www.newyorker.com/online/blogs/johncassidy/2010/03/obamacare-by-the-numbers-part-1.html

http://www.newyorker.com/online/blogs/johncassidy/2010/03/obamacare-by-the-numbers-part-2.html

Posted by: jnc4p | October 22, 2010 1:26 PM | Report abuse

The problem with Gruber's analysis is that it completely blows up for part-time workers (far less than 50% of retail workers are full-timers, newly defined in the PPACA as 30 hrs/wk averaged over a month). The penalty of $2000 per worker (BTW, NOT a strong penalty... look at what the House bill proposed...) is only incurred when FULL TIME workers are not offered coverage, go into the exchange and get subsidies. Employer Responsibility in the PPACA is a joke. We are going to see employers rushing to change workers' schedules so almost everyone in retail - and many other industries - will be working 29 hrs/wk. And going into the Exchanges to get health coverage.

Posted by: BGCHEN | October 22, 2010 3:29 PM | Report abuse

The problem with Gruber's analysis is that it completely blows up for part-time workers (far less than 50% of retail workers are full-timers, newly defined in the PPACA as 30 hrs/wk averaged over a month). The penalty of $2000 per worker (BTW, NOT a strong penalty... look at what the House bill proposed...) is only incurred when FULL TIME workers are not offered coverage, go into the exchange and get subsidies. Employer Responsibility in the PPACA is a joke. We are going to see employers rushing to change workers' schedules so almost everyone in retail - and many other industries - will be working 29 hrs/wk. And going into the Exchanges to get health coverage.

Posted by: BGCHEN | October 22, 2010 3:31 PM | Report abuse

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