New Orleans The good news in the narrative of Obamacare is that everyone gets covered, there are basic guarantees, and in 60% of the states more people, particularly lower income children, are covered by expanded Medicaid. Those are just the highlights, and they are lifesaving. The controversy continues for conservatives and businesses around the mandates, the fact that all businesses of a certain size are required to provide coverage. In truth, this is largely a fiction. The quieter, more painful, side of the mandates is the fact that everyone is required with some exceptions to embrace the coverage offered and available, and if not are also required to pay a penalty. The penalties were relatively trivial, but are becoming more expensive.
The fictional burden for companies has proven to be Swiss cheese, a drum I’ve admittedly been beating for several years now. Payments for monthly premiums could not be higher than a certain percentage of a worker’s gross payroll, but unlike the Massachusetts model, there were no limits on deductibles and little to none on co-pays. Nursing home chains, janitorial contractors, mental health and home care providers and untold other employers demanded and eagerly received from the insurers bare bones, narrow network plans with deductibles ranging from $4000 to $6500 along with significant increases in co-pays and of course required payment of monthly premiums.
The real cost to employers? Almost nothing in practice, because lower waged workers, making less than $15 or $20 per hour are priced out of such policies both by dollars and common sense. If a nursing home worker is making $10 per hour – and many aren’t! — and works an industry standard 35-hour week while being paid for annual labor about $18,000 in gross wages, and might be facing a $5000 deductible and to be conservative another $1000, she would be losing one-third of her income before she was able to access any benefits from the plan other than the statutory minimums. Why would she enroll in the employer’s plan if she were looking after her own economic self-interest? No reason, and in fact as Local 100 looks at the participation numbers from workers we represent, almost no one is signing except those who anticipate critical or catastrophic care situations like imminent surgery.
The math for the worker in this situation when required to pay penalties, as they are in Arkansas for example, at the 2.5% assessment would be $450. Cheaper to pay the piper than the policy. In Louisiana, Texas, and the other 18 states that did not expand Medicaid, if these workers would have been eligible, and with this income and likely family size, most of them would have been, they are exempted from paying the fine. There are other exemptions, but most are catastrophic in nature as well: homelessness, medical debt, unemployment, and worse.
Everyone is talking about inequality. Politicians, economists, and columnists on all sides of the spectrum make the point about jobs increasing but wages remaining stagnant, so the paradoxical impact of this healthcare conundrum is that the pain will worsen for lower income workers with largely frozen wages. In a ton of states not only will these workers not get raises, but they will pay in this example a fee out of their tax returns collected by the IRS.
For the nursing home worker we have used as an example, a $450 penalty under the Affordable Care Act is equal to twenty-five cents per hour in lost wages. In states throughout the South with strapped budgets and reduced reimbursements for such workers, they would need to win a 2.5% wage increase just to stay even, and without a union that’s not going to happen, and in all likelihood even with a union that’s going to be rare. Such a worker, and there will be millions of them, will wake up in 2016, 2017, and find themselves in a situation where they are in a double bind with a smaller paycheck and still no healthcare coverage thanks to the miserly offering of their employer and the loopholes that allow farcical coverage to mask as real insurance.
This is a huge problem, and it is not going to end well.