From prior posts (just click on the health care tag at left), you’ll see I’m pretty sympathetic to Obamacare. It reduces the uninsured and creates safety nets for people who lose coverage from their employer. It’s structured such that it will reduce the deficit and has cost controls that, because of quite sensible budget rules, it never got credit for. It has a good chance to break the inflationary expectations that have bloated U.S. health care over the past three decades.
But every greyhound track has a couple of dogs. With Obamacare, there are two, and EBRI, the Employee Benefit Research Institute, looks into one of them – a subsidy for early retirees. It sees problems, but I don’t think they are insurmountable.
First, a bit of background: Most of the muscle in the Affordable Care Act doesn’t become law till 2014 – the main one being the rollout of health insurance exchanges, where individuals and small businesses can shop. The fear was this: Before 2014, today’s early retirees – many of whom get coverage from their old employers – would lose coverage. Without the exchanges, these people would have – realistically – nowhere to turn. You’d be hard put to find an insurance company that wants to write that group. Adverse selection, don’cha know.
So Obamacare offers a carrot to employers: The federal government reinsures 80% of the 75K XS 15K layer per person on early retiree costs paid for by employer plans – starting this year and running until Jan. 1, 2014 (when the exchanges start). The Feds allocated $5 billion to do the job.
If that is a carrot – EBRI’s analysis shows – then the carrot:bunny ratio is way under 1.0. EBRI indicates half the money will be used this year, and it will run out during 2011. EBRI crunches the numbers in this PDF. Business Insurance hits the highlights here.
But it ain’t the end of the world. Though $5 billion is way more than enough to get me buying PowerBall tickets, it’s a pittance to the Feds. Assuming $5 billion lasts a year or so, you’d need another $12 billion to $15 billion over the next 2½ years to finish the job. Already the federal budget anticipates spending about $10 trillion over that time, and $15 billion is 0.15% of that.
I think they’ll find the money.
Obamacare’s other dog is long-term care – the CLASS Act – but that will wait for another day.