Don't blame ACA: It's not about jobs, but business costs
Well, they've done it again. The Washington Wackos shut down the government over Obamacare. Whatever the reason du jour may now be for the attacks on the Affordable Care Act (ACA), the one that both politicians and business leaders have used the most is: "It's a job-killer."
But restructuring the health-insurance system is not a jobs issue. It is a business cost and, therefore, a competition problem, and the sooner everyone concedes that reality, the sooner we start dealing with a serious issue seriously.
For decades, not just since the passage of the ACA, rapidly rising health-care costs have driven firms to shift more of the burden onto workers. Many are even terminating insurance and, by doing so, shifting their health-care expenses to their employees, businesses that provide insurance, insurers, health-care providers, and the government. And most small or midsize businesses cannot afford to offer health insurance - even if they wished to do so.
The consequence is that employer health insurance is available neither universally nor equally. It is an expensive burden of doing business, but one that is borne by only a portion of the business community. That makes it a competition and profitability issue that is forcing firms to take all sorts of actions to avoid the costs.
Consider the UPS decision to stop offering health insurance to employees' spouses who could get coverage elsewhere. Nothing in the ACA required UPS to do that. So why did UPS make that change? Simple: It was subsidizing all the firms that employed their employees' spouses. How? By providing superior health insurance!
Since it offers better coverage, the spouses chose the UPS plan rather than the insurance offered by their employers. This lowered the health-insurance costs of the spouses' firms, but shifted the expenses onto UPS. The ever-rising subsidies became detrimental to UPS's bottom line. UPS's management took the financially expedient and probably fairest option: It terminated the spouses, shifting those costs back onto the spouses' firms.
Unfortunately, UPS blamed the ACA for the insurance modification, even though it didn't cause it. Instead, the ACA provided cover for the company to make a change it probably had thought about for years but was afraid to implement because it would create resentment in the ranks. By blaming the government, UPS deflected that anger.
Similarly, the decision by Walgreens, the pharmacy chain, to shift its employees onto a health-care exchange rather than pay directly for the insurance was a financial decision made under the cover of the ACA. This move is the health-insurance equivalent of shifting employees from defined-benefit (traditional pension) plans into defined-contribution (401(k)-type) plans. The purpose is to limit health-insurance costs in the same way that pension costs were controlled.
Was Walgreens or any of the other large companies who opted for exchanges required to do so by Obamacare? No. Was it made possible? Yes. Will it lower business costs? Yes. Should businesses be thankful they now have this option? Yes. Are they? Not publicly, but you can bet they are privately.
The makeshift efforts to limit health-insurance costs cannot go on forever. Why? Every firm that does not provide health insurance is a "free-rider" on the health-care merry-go-'round. Someone must absorb the costs of the uninsured who use the system. If companies can force others to pay that bill, they will.
Between the rapid rise and the shifting of costs, health insurance is devouring corporate profits. The vast differences in per-employee health-insurance expenses across firms can no longer be maintained, especially since competition is global and foreign companies rarely provide health insurance.
Whether it is a matter of profit or survival is irrelevant: Shifting health expenses onto other firms is an unsustainable option. The employer health-insurance system will ultimately collapse, and the end result will be either no health insurance - and a failed health-care system - or a fully government-run program.
Politicians too often use simplistic arguments to make their points, and the ACA being a job-killer is clearly one. But corporations should stop blaming the government for actions being taken for competitive reasons.
The business sector must refocus the debate by demanding a massive restructuring in the way we all pay for health care.
The issue should be: How do we limit costs and spread them fairly, so all companies can operate in a global environment without rising health costs' destroying competitiveness?
The ACA is a starting point for that discussion of health insurance, not an end point.
Joel L. Naroff is president and chief economist of Naroff Economic Advisors Inc., of Holland, Bucks County. firstname.lastname@example.org.