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Significance Of IBM Retiree Decision

Posted Sep 18 2013 11:53am

Stanley Feld M.D.,FACP,MACE

 IBM’s dropping of retirees’ healthcare plans will be the cause of a continuing avalanche of companies dropping healthcare insurance for its non-retired employees .  These companies are doing it in two ways. They are decreasing work hours from 40 to 30 hours per week. They are hiring part time employees. The are also outsourcing work to avoid paying an “Obamacare penalty.”

Companies are contracting with “Private Health Exchanges” to service the rest of their employees . The companies provide a stipend for healthcare coverage and send employees to the “Private Health Exchange” to buy coverage. If employees cannot afford the coverage, employees would be able to buy insurance from the government health insurance exchange.

 

In February 2011 I wrote about the McKinsey study that estimated the percent of employers that would stop providing healthcare insurance for their employees in 2014.

None of the Obamacare fans wanted to believe this study.

Senator John Kerry and Representative Barney Frank said a public option was essential in order for Obamacare to work.

President Obama told them not to worry. Obamacare will work without a public option.

I called Obamacare’s health insurance exchanges essentially Obamacare’s Public Option. Consumers will be forced into the health insurance exchanges in 2014.

The Congressional Budget Office provides congress estimates of the effects of legislation. The CBO is not required to think.

 The CBO crunches numbers provided to it by the administration. The administration has been less than candid with everyone including the American public

The Congressional Budget Office estimated that only 7 percent of employees currently covered by employer-sponsored insurance (ESI) will have to switch to government subsidized-exchange policies (Public Option) in 2014.”

The McKinsey study concluded; Feb 2011

 

  • Overall, 30 percent of employers will definitely or probably stop offering ESI in the years after 2014.
  • Many Human Resources officers and CFOs do not know the implications of Obama care.
  • Among employers having a high understanding of President Obama’s Healthcare Reform Act more than 50% will stop offering employee healthcare benefit and more than 60% will make some kind of change.
  • At least 30 percent of employers feel they would gain economically from dropping coverage and paying the penalty. They would even gain if they increase their employees’ salary or other benefits.
  •  The insurance coverage is in excess of $15,000 per year per employee. The government penalty is $2,000 per employee.
  • The difference in cost will force employers to drop ESI and force employees into the Public Option.  This was President Obama’s plan all along.
  • The survey also showed that more than 85 percent of employees would remain at their jobs even if their employer stopped offering ESI.
  • Sixty (60) percent of employees would expect an increase in compensation from their employers
  • Who are these rules in favor of? They are not in favor of the employee.”

 

“Health care reform fundamentally alters the social contract inherent in employer-sponsored medical benefits and how employees value health insurance as a form of compensation.”

 “Obamacare” guarantees the right to health insurance regardless of an individual’s medical status or ability to pay. In doing so, it minimizes the moral obligation employers may feel to cover the sickest employees, who would otherwise be denied coverage in today’s individual health insurance market.

The logical result is healthcare insurance premiums would increase for the individual and benefits would decrease to keep the premium cost down.

In 2014, people who are not offered affordable health insurance coverage by their employers will receive income-indexed premium and out-of-pocket cost-sharing subsidies from the government through public health insurance exchanges.

The highest subsidies will be offered to the lowest-income workers. It enables these low paid workers to obtain coverage they could not afford in today’s individual healthcare insurance market.

It will force people into the dysfunctional individual insurance market under public supervision of public health insurance exchange.

The government will pay the subsidies for the resulting increased premiums that will result from expanded coverage in this “Public Option.” The government would then pass the increased premium cost on to the taxpayer on a means tested basis and with higher taxes.

This is what Don Berwick and President Obama meant by redistributing wealth.  

The next step is government’s complete control of a single party healthcare system. 

Employers will no longer be able to offer better healthcare insurance benefits to their highly compensated executives either. Companies will be forced to discontinue employee healthcare coverage. We see that happening in the Fall of 2013.

The penalty is set low to further encourage companies to discontinue coverage. President Obama’s goal is to have most people in the “Public Option.”

This will lead to government control of the healthcare system and all the inefficiencies that will result. These inefficiencies will increase the cost of care and result in a decrease in access to care as well as rationing of care.

 State insurance exchanges will be paid for by the states with a federal subsidy. These exchanges will offer individual and family policies of set benefit levels (bronze, silver, gold, and platinum) from a variety of insurance companies.

The effect on the federal deficit will be much greater than the original CBO’s estimated. The number of people who will loss their company insurance was estimated by the CBO at 10 million, or about 7 percent of employees, currently covered by ESI.

Seventy (70) million people was McKinsey’s estimate in 2011.

A July study by Craig Garthwaite of Northwestern University’s Kellogg School of Management predicts as many as 940,000. That number is an estimate of how many adults without children are working because of what the researchers call “employment lock.”

This increased number of participants will add to the federal deficit. The increased federal deficit will result in higher taxes for everyone, including the middle class.

“The taxpayers are going to get hammered,” says Douglas Holtz-Eakin, a former Congressional Budget Office director who is now president of American Action Forum, a Washington-based advocacy group that opposes the health law. “It’s going to be extraordinarily expensive.”

President Obama wins his ideological goal. Consumers will have less control over their own healthcare decisions and choices. 

The healthcare insurance industry will gain more control over pricing. This will increase profits because they will administer government health insurance exchange services. President Obama will continue to outsource the administrative services to the healthcare insurance industry.

 The losers will be consumers and physicians.

The impending results are all totally predictable. Obamacare fans refuse to listen.

 The opinions expressed in the blog “Repairing The Healthcare System” are, mine and mine alone

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