Affordable Care Act May Mean Less People Working
Religion & Liberty Online

Affordable Care Act May Mean Less People Working

The official White House website says that all Americans will now have access to affordable medical care, and that small business owners need not worry about rising costs:

The proposal will also provide tens of billions in tax credits for small business owners to make insurance coverage more affordable. Small businesses will also have a new option of purchasing insurance through the exchanges. By pooling their resources in the new insurance marketplace, small business owners will lower their costs and have the same choices that big corporations and unions enjoy.

That’s all well and good, but as the National Bureau of Economic Research sees it, we may end up with less people working. In a paper published this month, three of the think tank’s researchers concluded, “Our results appear to indicate that the soon-to-be-enacted health-care reform may cause substantial declines in aggregate employment.” What does that mean? Small businesses aren’t going to go for the “pooling” option; they’ll just hire less people, and provide less people with health insurance.

The research was concerned primarily with Americans who worked at jobs paying about $22,000 per year and were receiving health care through their employer. In fact, many of these people kept their jobs ONLY because they received health care. But in 2014, things change:

There are between 850,000 and 1.5 million childless adults in the United States who earn less than 200 percent of the federal poverty line – about $22,000 per year – and have employer-provided health insurance.  They do not qualify for public health benefits because they earn too much and have no dependents, but under the rules — which take effect in 2014 — those workers will be able to buy insurance on federal or state-based health insurance exchanges.

Because of their low-income status, they can qualify for subsidies to cover part or all of the cost of their health insurance premiums.

The new study suggests that at least some of those workers are only maintaining their jobs to keep their employer-sponsored health plans. Given the option to buy cheaper insurance through the exchanges, many may cut back on their hours or drop their jobs entirely.

The report is critical of the Affordable Health Care Act (ACA):

The ACA will weaken the link between employment and health insurance through the creation of a series of state-based individual insurance exchanges. An individual mandate will require that nearly all individuals purchase health insurance, which may relieve adverse-selection pressures. Additionally, low-income individuals participating in the exchanges will receive large tax subsidies, and those earning less than 138 percent of the poverty line regardless of their family or disability status are expected to receive public health insurance through a large Medicaid expansion. [emphasis added] notes small businesses in Wisconsin, for example, are worried not only about having to pay higher wages, but having a shrinking hiring pool to choose from as they struggle to recover from the recession.

Jeff Zriny, president and CEO of the Wausau Region Chamber of Commerce, says employers would be forced to drive up wages even higher, a scenario that could ultimately be costly for Wisconsin’s economic recovery.

‘There would be an hourly wage creep that would spread through the organization, which probably could not be absorbed by the company,’ Zriny said.  ‘That’s what happens when you interfere with the free market.’

You can read the National Bureau of Economic Research’s “Public Health Insurance, Labor Supply, and Employment Lock” here.

Read’s “Affordable Care Act could shrink workforce by 900,000.

Elise Hilton

Communications Specialist at Acton Institute. M.A. in World Religions.