Wishful Thinking On Romneycare & Obamacare for Employers

Over at the left-of-center blog The Incidental Economist, Austin Frakt has picked up the misplaced logic of those on the left to compare the experience of Massachusetts and extrapolate it to the national level, especially for employer behavior. Perhaps some wishful thinking.

By pointing to recent state data on employer offer rates for insurance, it seems to prove that employers under a mandate system at least still offer insurance. But I am not sure offer rates are a good indicator of much, especially in a down economy. Weaker companies go under and push up the rate. Plus if you look at historical data, offer rates have always been higher in Massachusetts compared to most of the rest of the nation.

I don’t think the behavior and commitment to health insurance shown by a bio tech company in Boston will be a good predictor of behavior for a manufacturing company in New Mexico or Texas that has not offered insurance to its employees in the past. Culture  matters, and insurance is no different in this regard.

I think a more important stat is take up rates. In Massachusetts we have seen an almost 10 percent decrease in eligible employees accepting insurance from their employers. This deserves much more attention and digging to find out why.

Finally, the incentives and penalties on employers in Obamacare and Romneycare are not the same. I will not go into detail here, but there is one HUGE difference that matters for employer behavior. There is a very high employer firewall in Massachusetts, keeping employees eligible for ESI out of the exchange and off subsidies.

In contrast, Obamacare has a 9.5 percent of income affordability threshold or actuarial value of below 60 threshold. This difference between the two laws, will impact employer behavior dramatically and the bottom line for ACA as well. I have written a much longer piece on this topic, which I hope will be published soon.

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