For years, ObamaCare critics focused on its least popular feature — the mandate that everyone buy insurance — taking their fight all the way to the Supreme Court.
But as ObamaCare’s official launch date approaches, even its backers are beginning to admit that the law could actually create powerful incentives for millions of people and thousands of businesses to drop their coverage, despite the mandate.
Like: Universal Studios Orlando, the #2 attraction next to Disney:
Universal Orlando plans to stop offering medical insurance to part-time employees beginning next year, a move the resort says has been forced by the federal government’s health-care overhaul.
The giant theme-park resort, which generates more than $1 billion in annual revenue, began informing employees this month that it will offer health-insurance to part-timers “only until December 31, 2013.”
The reason: Universal currently offers part-time workers a limited insurance plan that has low premiums but also caps the payout of benefits. For instance, Universal’s plan costs about $18 a week for employee-only coverage but covers only a maximum of $5,000 a year toward hospital stays. There are similar caps for other services.
Those types of insurance plans — sometimes referred to as “mini-med” plans — will no longer be permitted under the federal Affordable Care Act. Beginning in 2014, the law will prohibit insurance plans that impose annual monetary limits on essential medical care such, as hospitalization, or on overall spending.
Universal is one of the largest employers in Central Florida, with approximately 17,000 employees. It has thousands of part-time workers, though Universal said only about 500 of them are enrolled in the current insurance plan, as many part-timers are covered by a parent’s or spouse’s insurance.
“We care about our team members and we want them to have best, most-affordable medical benefits we can provide,” Universal spokesman Tom Schroder said Tuesday. “This particular issue affects about 3 percent of our 17,000 team members, and we’re going to continue to work toward a solution.”
A spokesman for Orlando-based Darden Restaurants (Red Lobster, Olive Garden,etc..) said Tuesday its limited-coverage plans will “go away after this year,” as well.
“We’d like to have the option to continue offering them, since they are popular with our part-time employees, but the ACA doesn’t offer that type of flexibility,” spokesman Rich Jeffers said. “There is still a lot we don’t know about the new health-care regulations for 2014, but we are committed to helping all of our employees navigate through the new environment as we learn more.”
Walt Disney World has about 1,400 part-time employees enrolled in limited plans. A spokeswoman for the resort would say only that Disney is “still assessing the health-care reform act and how it impacts our business.”
“They have not talked to us about it yet,” added Eric Clinton, president of Unite Here! Local 362, which represents some of Disney’s part-time employees.
SeaWorld Orlando, too, offers some limited-benefit plans to part-time and seasonal workers. The company said it is “currently assessing options.”(Orlando Sentinel)
There is growing concern, for example, that the law’s market reforms will cause a huge “rate shock,” particularly for those young and healthy.
A February survey of major health insurance companies in five cities across the country found that they expect premiums for this group to climb an average 169%.
Aetna CEO Mark Bertolini said late last year that he expects premiums to double for some small businesses and some individuals as a result of the law.
And state insurance commissioners are worried as well.
“We are very concerned,” California Insurance Commissioner Dave Jones told federal health officials at a December meeting, “if there is so much rate shock for young people that they’re bound not to purchase (health insurance) at all.”
The cause of this rate shock is simple: ObamaCare imposes what is called “community rating” on insurance companies, effectively forcing them to charge the young and healthy more so they can charge older and sicker consumers less.
The five-city survey, for example, found that while the law will jack up rates for the young, it will lower them an average 22% for older and sicker customers.
Which means the lowest risk is paying much higher because the higher risk are paying less. THE EXACT OPPOSITE of the way insurance is supposed to work.
That’s like lowering the premiums on the guy who’s had 2 DUIs and raising it on the driver who hasn’t had an accident in 20 years to pay for it.
At the same time, ObamaCare also forbids insurance companies from turning anyone down — a reform called “guaranteed issue” — which also will provide an incentive for some to drop coverage, knowing they can get it back any time.
“Even with the tax penalty … some healthy people would avoid purchasing coverage until they are sick,” Howard Shapiro, director of public policy at the Alliance of Community Health Plans, told regulators .
The problem is that if the young and healthy drop coverage, the result be what the industry calls a “death spiral.” Premiums will climb as the pool of insured gets sicker, causing still more to cancel their policies.
This is just what happened in states that imposed strict community rating and guaranteed issue reforms in the past. In fact, of the eight states that did so, most ended up either dropping the reforms or loosening the rules after they saw enrollment decline and premiums climb.
ObamaCare backers say the law’s subsidies will keep premium costs down, while the mandate to buy insurance will keep the young and healthy in the market.
But even they admit that the subsidies won’t protect everyone from ObamaCare-caused rate shocks, and the mandate is likely to prove too weak to be very effective.
In fact, the annual penalty for not buying insurance will be as low as $95 in 2014, and even when the mandate penalty is fully phased in by 2016 it will be modest relative to the cost of buying insurance.
In one illustrative example provided by the IRS , a family earning $120,000 in 2016 would owe just $2,400 in “shared responsibility payments” — the administration’s new euphemism for the penalty — while buying insurance would run them, in the IRS example, at least $20,000.
In addition, after 2016, the penalty amounts will be indexed to inflation, even though insurance premiums have consistently risen much faster than the CPI, which means “shared responsibility payment” will be less of a deterrent over time.
On top of all this, the IRS has virtually no ability to collect the penalties from those who don’t pay them. As the IRS itself explains, the law forbids the agency from imposing liens or criminal penalties, leaving it few options beyond deducting the penalty from tax refunds.
Aren’t you glad you bought the “Vote For Me, the Other guy’s an Asshole!” because you wanted everything to be the same as it has been. 🙂