Joe Biden has often said that his health-care plan wouldn’t disturb individuals who currently have coverage.
During the first presidential debate, he denied President Trump’s assertion that his plan would ban private insurance or take away coverage options. When rolling out his health-care plan last year, Biden went so far as to reiterate Barack Obama’s infamous “Lie of the Year;” the former vice president claimed that “If you like your employer-based plan, you can keep it.”
Except many Americans may not get to do that. Repeating something over and over again doesn’t make it so. As I outline in a recently released report, Biden’s policy proposals could do much to destabilize the current system of employer-based health coverage — putting us further down the path to a government-run single-payer system.
Key Features of the Biden Plan
The issue arises from two linked elements of Biden’s health-care platform. First, Biden would increase subsidies for coverage on the Obamacare exchanges. He hasn’t released all the specifics, but he wants to lower the share of income individuals must pay out-of-pocket in premiums, and provide additional cost-sharing assistance to handle things like deductibles and co-payments.
Second, Biden would allow individuals who currently have employer coverage to qualify for exchange subsidies. Obamacare created a so-called firewall between employer and exchange plans, such that individuals with an offer of “affordable” coverage from their employer cannot qualify for exchange subsidies.
Democrats originally included the firewall in Obamacare because they wanted to keep individuals with employer coverage in their employer plan, to lower the spending on Obamacare subsidies. Biden now has no such compunctions about increasing subsidy spending, so wants to repeal the firewall entirely.
People Likely to Switch
The richer subsidies, coupled with the repeal of the firewall, would mean that many individuals with employer coverage will switch to exchange plans. My report uses data on the average employer plan premiums and deductibles in 2018 and compared those to a subsidy regime proposed by the Urban Institute and cited in Biden’s plan.
As the below chart shows, I find that virtually all households with incomes of under 200 percent of the federal poverty level will save at least $100 per month in total premium and deductible costs. A sizable number of households with incomes between 200-300 percent of the poverty level will save money as well.
Assuming that most (90 percent) of households who can save at least $100 per month switch, and that half of households who can save some amount less than $100 per month do so as well, I find that approximately 24 million individuals would switch from employer coverage to the exchanges.
Serious Consequences
Of course, the left would consider this finding a feature and not a bug. If households of modest means can save thousands of dollars by switching coverage, why not give them the chance to do so? But as Newton’s third law of motion suggests, this action would have significant opposing reactions on the health-care system. Here are some of the major such repercussions.
Higher Spending: The change would put a lot more people on the exchanges, raising subsidy spending substantially. Applying Congressional Budget Office (CBO) estimates of average exchange subsidy costs to the 24 million people likely to switch coverage suggests that total spending would rise by $2.2 trillion over the next ten years (2020-2029).
By comparison, CBO estimates that under current law, exchange spending will total approximately $612 billion in the coming decade — a fraction of the potential new spending under Biden’s plan. Also worth noting: The $2.2 trillion in new spending would not reduce the number of uninsured one bit — it merely represents a cost shift from the private sector to the federal government.
Taxes on Businesses: If workers have the opportunity to move to exchange coverage, employers could face employer mandate taxes for workers who switch. Obamacare imposes a penalty, set to rise to approximately $4,060 per worker in 2021, for employees of large businesses who receive exchange subsidies.
Right now, employees of firms that offer “affordable” coverage can’t qualify for exchange subsidies. But if Democrats remove this firewall, workers who switch would trigger Obamacare mandate taxes for their employers.
Biden hasn’t said whether he supports modifying the employer mandate so that workers who voluntarily switch to the exchanges would not trigger taxes for their employers. But if this tax remains, it would hit businesses to the tune of approximately $481 billion in the coming decade.
As the below graph shows, that amount wouldn’t begin to pay for all the $2.2 trillion in new subsidy spending — but it would drag on businesses as they try to grow and recover from coronavirus lockdowns.
Employers Dropping Coverage: Finally, the departure of approximately 15 percent of all those with employer coverage would weaken the employer-based health insurance system. I estimate that, of the individuals switching coverage, approximately 64 percent would be under the age of 35.
Younger individuals have lower incomes earlier in their working careers, and thus are more likely to benefit from the subsidies available to households of modest means in the exchanges. Of course, younger, and often healthier, workers departing from employer coverage would leave businesses to cover an older — and often sicker — pool of workers. Facing this scenario, some employers could well decide to drop coverage altogether.
Democrats: Nothing to See Here, Just the End of Insurance
The Biden plan provides a framework for unraveling the current system of employer-based health coverage, in ways that may not take much longer than the legislation by Sen. Bernie Sanders, D-Vt., that outlaws private insurance. Even if it doesn’t abolish private coverage outright, Biden’s plan will have greater and more far-reaching effects than the candidate suggests in his public comments and rhetoric.
Nearly two years ago, Biden’s running mate, Sen. Kamala Harris, D-Calif., infamously suggested with regard to private health insurance: “Let’s eliminate all of that. Let’s move on.” His rhetoric notwithstanding, Biden’s health-care plan could lead to that very outcome.
