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How Obamacare Burns the Ships


In 1519, Hernán Cortés landed in what is now Mexico from Spain, after the long and arduous ocean journey typical of the early 16th Century, with just 600 men and an apparently impractical plan to conquer the land of the Aztecs. A commander more concerned with the welfare of the men under his care would have provided for the possibility of an exit strategy if his plan didn’t work. Instead, in a near-suicidal display of Cortés’ iron will and cruelty, he scuttled his ships (in the legendary retelling, burning them in the harbor), leaving his men no way home but forward. If their venture failed, they would die to the last man.

As it happens, this is the same approach the Democrats have chosen for the healthcare of 300 million Americans. One of the popular choruses sung in unison by Democratic pundits these days is that Republicans are trying to “sabotage” Obamacare while attempting to delay its implementation. We are told that Obamacare is so wonderful that everyone will love it if it is implemented exactly as planned – well, except for the many parts that are being unilaterally delayed by the Administration, or as to which Democrats want help fixing mistakes in the statute – that there’s something wrong with anyone who opposes permanent implementation of a statute that has already passed, and that the public doesn’t support plans to “sabotage” its implementation (as to that last, however, note that almost as many Americans polled want Congress to make Obamacare fail as want them to try to improve it.).

The constant theme is that Republicans are somehow in fear that voters who have consistently been opposed to Obamacare for five years of polling will suddenly fall in love with its glorious implementation. What’s missing from this picture is an understanding of what it is the Democrats have been doing and why it is so important to them to get Obamacare’s exchanges and individual mandate in place on schedule for today’s launch – no matter how ineptly they function, no matter which constituencies need to be paid off to go along, and no matter how much the public dislikes the project.

The goal, put simply, is to destroy the current insurance market so that there is no going back. Like Cortés, the Democrats want to burn the current healthcare system to ashes so no future Congress can rebuild it if Obamacare doesn’t work. The most prominent example is business and public employers dropping health insurance for their employees:

The nation’s largest provider of security guards plans to discontinue its lowest-cost health plans and steer roughly 55,000 workers to new government-sponsored insurance exchanges for coverage next year, in the latest sign of the fraying ties between employment and health care. The U.S. arm of Sweden’s Securitas AB….is among more than 1,200 employers that offer the kind of bare-bones health plans that must be phased out beginning Jan. 1 under the health-care law. Nearly four million people are enrolled in these so-called mini-med plans, which cap benefits to participants, sometimes at as little as $3,000 a year. “The mini-meds go away and we’re not replacing them,” said Jim McNulty, a spokesman for Securitas’s U.S. operation. “Their option is to go to the exchanges.” Other big employers, including Darden Restaurants Inc….say they will stop offering health insurance to part-time workers, and will direct those employees to the state exchanges.

The same is true of big box stores:

Home Depot Inc….the world’s largest home improvement retailer, plans to end medical coverage for about 20,000 part-time employees and direct them to government-sponsored exchanges scheduled to open next month as companies revamp benefits to fit the U.S. Affordable Care Act. Employees with fewer than 30 hours a week will no longer be offered limited liability medical coverage, Stephen Holmes, a spokesman, said today by telephone. About 5 percent of Atlanta-based Home Depot’s 340,000 employees are enrolled in that plan.

And delivery services:

United Parcel Service Inc. plans to remove thousands of spouses from its medical plan because they are eligible for coverage elsewhere. The Atlanta-based logistics company points to the Affordable Care Act, or Obamacare, as a big reason for the decision, reports Kaiser Health News… Rising medical costs, “combined with the costs associated with the Affordable Care Act, have made it increasingly difficult to continue providing the same level of health care benefits to our employees at an affordable cost,” UPS said in a memo to employees. According to Kaiser, UPS…told white-collar workers two months ago that 15,000 working spouses eligible for coverage by their own employers would be excluded from the UPS plan in 2014.

Even universities are getting in on the act:

University of Virginia will no longer provide benefits for spouses with coverage options elsewhere.

And grocers, too:

Et tu, Wegmans? The Rochester-based grocer that has been continually lauded for providing health insurance to its part-time workers will no longer offer that benefit.

Even the crunchier ones:

Trader Joe’s informed part-time employees that as of next year, they would no longer be eligible for company-sponsored health plans. Although employees averaging 18 hours a week had traditionally qualified for the plan, workers with less than 30 hours a week learned they would be given a check for $500 and nudged into state-run insurance exchanges created by the Affordable Care Act.

And photographers:

Lifetouch National School Studios, the world’s largest employee-owned photography company, has sent a letter to employees explaining that new provisions in the Affordable Care Act (ACA) have forced them to review and make changes to their benefit plans. That review has led the company to announce that health insurance benefits will be discontinued for part-time employees “across Lifetouch.”

City governments are behaving rationally in response:

Detroit, as part of its bankruptcy plan, wants to stop providing health care to retirees and instead give them each a $125 monthly stipend to buy insurance in the exchange. Currently, Detroit spends $721 per month per retiree on health benefits, so this move will allow Detroit to cut its OPEB liability by 80%. But it won’t just be bankrupt cities like Detroit making the move. Chicago and Rhode Island — governments facing tight fiscal situations but not on the brink of bankruptcy — are considering similar shifts.

County governments are no different:

Milwaukee County would end health insurance coverage for some or all of its 4,400 employees and instead direct them to buy their own coverage through the new federal health insurance exchanges, under a proposal included in County Executive Chris Abele’s 2014 budget. The shift could save the county at least $10 million a year, according to an estimate included in Abele’s budget, which must be approved by the County Board.

And what about the longer term?

A report from the House Ways and Means Committee finds that 71 of the nation’s top 100 companies would find it far more economical to drop their health care plans and simply pay the penalty for not complying with the Obamacare employer insurance mandate. The report, published May 1, surveyed 71 of the 100 companies in the Fortune 100 list of large corporations and finds that all of them would save considerable amounts of money by dropping their health care coverage instead of complying with the Obamacare insurance mandate. “According to data provided by the 71 Fortune 100 companies that responded to the inquiry, they could save a total of $28.6 billion in 2014 alone if they stopped offering health insurance to their U.S. employees and instead paid the employer mandate penalty for not doing so,” the report said.

Many large companies are considering dumping coverage:

Internal documents …reviewed by Fortune, originally requested by Congress, show what the bill’s critics predicted, and what its champions dreaded: many large companies are examining a course that was heretofore unthinkable, dumping the health care coverage they provide to their workers in exchange for paying penalty fees to the government…[In 2010, Democrats subpoenaed] 1,100 pages of documents from four major employers: AT&T, Verizon, Caterpillar and Deere… No sooner did the Democrats on the Energy Committee read them than they abruptly cancelled the hearings.

It’s readily apparent you can’t keep your health care plan:

According to the Towers Watson survey, when asked how they thought plans would change by 2018—the year that Obamacare’s “Cadillac” tax on high-cost plans takes effect—92 percent of employers said plans would be different, with 47 percent saying they anticipated significant or transformative change.

Unions are alarmed as well, noting that Obamacare’s mandates would undermine the economic advantages of unionization by making it less attractive for employers to have union members in multi-employer plans when they could be dumped into the individual exchanges:

The AFL-CIO at its convention [in mid-September] passed a resolution calling President Barack Obama’s health law “highly disruptive” to some union insurance plans, “substantially changing the coverage available for millions of covered employees and their families.”

Then there’s business and public employers reducing hours and altering work schedules and the mix of full-time vs part-time workers in their employ. Investors’ Business Daily has been keeping a scorecard:

[W]e’ve compiled a list of job actions with strong proof that ObamaCare’s employer mandate is behind cuts to work hours or staffing levels. As of Sept. 25, our ObamaCare scorecard included 313 employers. Here’s our latest analysis, focusing on cuts to adjunct hours at nearly 200 college campuses….

Some of the examples:

  • SeaWorld Entertainment is capping hours for part-timers to 23 from 32 hours.
  • Wal-Mart is only hiring temporary employees, a policy change that is not generally done during the upcoming holiday season.
  • Land’s End has cut employee hours to no more than 29 hours a week.
  • Regal Entertainment, via an internal memo, blamed ObamaCare requirements for their capping hours below the 30-hour threshold.
  • New England Motor Freight implemented an hourly cap for abut 400 part-time employees.
  • Emory Health Care Company in Georgia has confirmed that “more than 100 Emory health care employees are going to lose their jobs in part because of the Affordable Health Care Act.”
  • At least 34 universities and colleges have cut the hours of part-time and adjunct faculty.

And then there are major providers:

“To prepare for healthcare reform, Cleveland Clinic is transforming the way care is delivered to patients. Over the past several years, we have had an ongoing focus on driving efficiencies, lowering costs, reducing duplication in services and enhancing quality to make healthcare affordable to patients. Although we have made progress, we need to further reduce costs to the organization by $330 million in 2014. We are carefully evaluating all aspects of our system to accomplish this. Some of the initiatives include offering early retirement to 3,000 eligible employees, reducing operational costs, stricter review of filling vacant positions, and lastly workforce reductions.”

(That would be the same Cleveland Clinic that is the second-largest employer in Ohio)

Restaurants are particularly hard-hit:

Almost 21 percent of restaurant employees work 30 to 36 hours each week, more than twice the 8.9 percent rate across all industries, according to data on companies with 100 or more employees from Berkeley’s Labor Center… Restaurant chains and franchisees argue that the mandate disproportionally affects their industry, where profit margins already typically range from 3 percent to 5 percent.

And small businesses:

Kelly’s Professional Cleaning Service, Inc….based in Greenville, S.C., has found itself caught on the edge of Obamacare’s regulations requiring it to provide health insurance to its employees….[Kelly’s owner] is hiring only part-time people as much as she can in order to keep her business below 50 full-time people, with “par-time” being under 30 hours per week.

Governments are following suit as well:

Many cash-strapped cities and counties facing the prospect of shelling out hundreds of thousands of dollars in new health-care costs under the Affordable Care Act are opting instead to reduce the number of hours their part-time employees work. [Citing examples such as Middletown Township, N.J. and Brevard County, Fla.] School districts in states like Pennsylvania, North Carolina, Utah, Nebraska, and Indiana are dropping to part-time status school workers such as teacher aides, administrators, secretaries, bus drivers, gym teachers, coaches and cafeteria workers. Cities or counties in states like California, Indiana, Kansas, Texas, Michigan and Iowa are dropping to part-time status government workers such as librarians, secretaries, administrators, parks and recreation officials and public works officials.

Insurers are exiting the market or changing the kinds of insurance that will be offered:

The first bomb dropped in California with a mass exodus from the most populated state’s Obamacare exchange. Aetna, the country’s third largest insurer, left first in July and was closely followed by UnitedHealth. Anthem Blue Cross pulled out of California’s Obamacare exchange for small businesses as well. Fifty-four percent of Californians expect to lose their coverage, according to an August poll. Medical Mutual of Ohio left Georgia and Indiana as well as South Carolina, due to Obamacare regulations. Patients of [Missouri’s] largest hospital system — which spans 13 hospitals including the St. Louis Children’s Hospital — will not be covered by the largest insurer on Obamacare exchanges, Anthem BlueCross BlueShield. Anthem covers 79,000 patients in Missouri who may seek subsidies on Obamacare exchanges, but won’t be able to see any doctors in the BJC HealthCare system.

Premiums have already responded:

The average employer-provided family health insurance premiums have climbed $2,976 since 2009, according to an annual Kaiser Family Foundation survey released this week. They’re up $3,671 compared with the year before President Obama took office. That’s despite Obama’s repeated promises that the health care reform law he championed would cut premiums by $2,500 in his first term.

History amply illustrates that a government program doesn’t need to be wise or popular to survive.

This, then, is the reality: Democrats have been so upset at GOP calls to delay the Obamacare’s exchanges and its individual mandate because they realize its best chance for survival is to entrench it, and the best way to do that is to destroy the only viable alternative. History amply illustrates that a government program doesn’t need to be wise or popular to survive, it just needs to change the facts on the ground so it becomes hard to undo. This is public choice theory 101: if a program has a small minority of dependent constituents who become vocal supporters, it becomes difficult and politically painful for a majority to remove. And if a program becomes the status quo, part of the landscape, then whole systems will grow up and adapt around it – bureaucrats hired to administer the system (think of Obamacare’s “navigators”) will become settled in their jobs, businesses and state local governments will adapt their practices and payrolls, insurance companies will rework their actuarial schedules around the new pools of policyholders. And then Democrats can campaign forevermore not on a radical retooling of the system, but on preserving it from the frightening unknown.

There’s another example of this in a different arena of policy: this is how our farm policy endures, year after year. Scorned by urban liberals and despised by free-market conservatives, almost nobody can muster a straight-faced defense of the system of cartel pricing and corporate welfare that drives up food costs for the poor and distorts markets in favor of unhealthy eating choices – but it doesn’t matter. Even farmers who aren’t that enamored of the system fear being released from the federal cocoon into the hurly-burly of the free market. So it lives on, a Depression-era experiment imprisoned in Dust Bowl economics in an iPhone economy. Democrats get this dynamic, and depend on it. The dead hand of the past is their strongest ally. The ships in ashes, we have no way back.

While Obamacare is intended to govern us in 2013 and for the foreseeable future, the narrow partisan majorities needed to pass it are already long gone, and the Congress of today is left only with the power of the purse to try to stop it.  The bill passed the House by just 7 votes, 219-212, on party lines in March 2010, and the House has voted to repeal it more than 40 times since, to no avail.  It had passed cloture in the Senate by just a single vote, with a coalition that was already history by the time the President signed the bill.  Two subsequent Congressional elections have left Democrats with nowhere near the support that would be needed to reaffirm it today.

One of the major reasons why our domestic politics are so divisive is because we have long since discarded the habit of experimenting with policies today that can be reviewed and revisited tomorrow if they don’t work; the Democrats in particular persistently pursue domestic policies that aim for permanent victories un-do-able by future voters, just as Bush-era neoconservatives set a blaze in the Middle East that rages still. Today, with the exchanges launching, Democrats scuttle the ships of the old health insurance market. To undo their work, conservatives can no longer simply resist radical change; they will have to pursue it.

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