Calculating Anew the Cost of the Affordable Care Act
If the public had known the true cost of the Affordable Care Act (ACA), it never would have passed. Deception and creative accounting masked the true cost of the bill from the beginning. But now, delaying employer mandates and allowing applications for government health care subsidies to go unchecked will add many more billions to the cost of this bill.
According to the ACA, starting January, 2014 companies with 50 or more workers are required to provide health care benefits for its employees or face penalties. Employers must provide the government, on a monthly basis, detailed information about the health plans they offer along with the individual salaries, hours, and health plans chosen by all their employees. This data would then be used by government IT systems to determine if these employers offered adequate health insurance and if not, would subject them to penalties until they did.
Meanwhile, beginning October 1, state health care insurance exchanges are scheduled to offer health insurance for sale, along with need-based financial assistance, to people who do not receive health care benefits through an employer or the government. These exchanges will also need the employer-provided data to verify employment information given by people applying for insurance and financial assistance. Without it there is no easy way to determine whether a person meets the requirements for using the exchange in the first place.
Concern for companies and the amount of effort required to build the infrastructure needed to collect and get this information to the government was given as a major factor in calling for the one-year delay. But the truth is, it’s the government’s systems that aren’t ready. In fact, companies are still waiting for information they need from the government to proceed with their development.
ACA officials dismissed concerns about this delay as being over blown. An Urban Institute study, they said, confirmed this since it claimed the delay would have little effect on government subsidies and only a slight reduction in revenue. That’s amazing! Nothing could be further from the truth since the Congressional Budget Office (CBO) calculated the employer mandate alone would bring in $10 billion in revenue the first year. Moreover, the analysis didn’t even cover the consequences of not validating the accuracy of applications for insurance and government financial assistance on the exchanges.
The employer mandate was set up as a “fire-wall” to prevent floods of workers with no insurance from applying for government subsidized health insurance. It’s true that most employers already provide health insurance for their employees. But the 5% that are affected by the mandate are thousands of smaller companies operating on tight profit margins. They employ 6.9 million of mostly lower wage workers. These people, because of the employer mandate delay, will look to the government subsidized health insurance sold on the exchanges for their health care needs and to avoid penalties for not having health insurance.
That’s going to add up to much more government financial support than was originally planned. Assuming only half the 10 million workers not previously covered by employers will seek exchange coverage, it’ll cost an estimated $48 billion the first year.
The ACA never would be law today if the true cost of the legislation were known. Accounting tricks, questionable revenue streams and extraneous taxes kept the official cost below $900 billion, the limit President Obama demanded. However, independent and respected analysts then let it be known that the cost would be higher, much higher and the general public began to back away. As a consequence, exotic and arcane congressional rules, political threats, unconscionable rewards, and out-right chicanery were required finally to get the bill passed. The last 4 years have seen the cost of that law explode past even the highest original estimates to, officially, $1.85 trillion and, unofficially, $2.6 trillion. Incredibly, it hasn’t even started being fully implemented. Where will this end?