Over at e21, Jim Capretta notes that under the PPACA, subsidies will vary greatly for those getting their insurance through their employers and those getting their insurance through the exchanges—to the benefit of the latter. Wouldn’t this result in many more Americans migrating from their company plans into the exchanges? Kind of seems like it would. Capretta:
Under the new law, workers with incomes below 400 percent of the federal poverty line but above the level for Medicaid eligibility who get their coverage through the new state exchanges can get federally financed “premium subsidies.” … At the same time, workers who get their insurance from their place of work also get an indirect federal subsidy because employer-paid premiums are excluded from workers’ taxable income.
The problem is that the subsidies inside the exchanges will far exceed the tax subsidy for employer-paid premiums at the lower end of the wage scale. … So, if workers would be better off in the exchanges, why does CBO assume so few of them will migrate out of employer plans? … In sum, CBO believes that other preexisting labor laws will make it very difficult for employers to selectively dump their workers into the exchanges
But what if CBO is wrong and employers are able to find ways around the existing rules to create a two-pronged approach to coverage, with high-wage workers staying in tax-preferred employer plans and low-wage workers migrating to the exchanges? In effect, that’s what CBO modeled (though with very modest assumptions) in what it called “scenario 4.” In that simulation, CBO assumes that 20 percent of those with income below 250 percent of the federal poverty line but above Medicaid eligibility would migrate from job-based plans to the exchanges. Net federal costs under this scenario would be $36 billion higher than CBO’s base case, even after assuming some higher federal revenue from the assumption of higher levels of taxable compensation. And that’s assuming just 20 percent of these households would find their way into the exchanges. What if the number is 50 percent? Or 75 percent? Then the hit to the budget would be far higher. … So, even if CBO is right and the rules are strong enough to prevent segregation of the workforce by income, how long is that kind of disparate treatment of similar households going to be tolerated by politicians?
Where there’s a will—and some political advantage for some politicians or lobbying group somewhere—there’s a way. And one more reason to think Obamacare will be far more expensive than current forecasts assume.