Earlier this month, Rep. Henry Waxman (D-CA) abruptly canceled hearings to investigate whether ending the deductibility of the retiree drug subsidy would cost employers billions of dollars. Without missing a beat, the Daily Caller’s Jonathan Strong and House Republicans are speculating that Waxman called off the much-publicized event to suppress embarrassing internal documents revealing that the health care law may cause employers to drop their existing health care coverage:
Publicly, Waxman said the investigation showed the companies’ disclosures were properly filed. But a new report from committee Republicans reveals the documents Waxman obtained included embarrassing evidence that the health-care law could drive up insurance premiums and force employers to dump employees from their health plans.
“Turns out Obamacare means if you like your health plan you can lose it. The president didn’t have to actually strong-arm companies into dumping their employee health insurance because his bill carried financial incentives to virtually guarantee that result,” Energy and Commerce Committee ranking member Rep. Joe Barton, Texas Republican, said. Most significantly, documents unearthed by the investigation highlight companies that are considering dumping employees from their current health-care plans in the face of new costs from the health-care law. President Obama repeatedly promised his health-care law would let Americans keep their current insurance if they’re happy with it.
Two things. First, if the Democrats were really interested in phasing out employer-based coverage, they would have adopted the Wyden/Bennett reform framework, which cuts the umbilical cord between worker, employer, and health care coverage. Secondly, if Republicans were interested in preserving the employer based system they would have supported a strong employer mandate to offer coverage (and their own health reform plans would reflect this). Instead, they spent the duration of health care reform arguing that requiring employers to provide health coverage would lead to dramatic job losses and drive companies out of business.
As for the actual substance of Barton’s claim — it’s overblown. The new health reform law may gradually ween us off our dependence on employer-based coverage as employees of larger companies will eventually be given the option of enrolling in a state-based exchange. But this will happen incrementally and inconsistently. Large employers want to continue offering benefits and for the foreseeable future, they probably will.
The real argument in the retiree benefit rebate debate, however, has always been two fold 1) are insurers actually losing billions and billions of dollars (those same documents that Barton was reading from tell us that they’re not) and 2) will eliminating the deductibility of the retiree credit cause employers to dump retirees into Medicare Part D? According to, Medco Health Solutions, a pharmacy benefit manager, this too is unlikely.
The “most likely choices for a large percentage” of companies was to stick with their current retiree drug plans, despite the less-attractive tax treatment, or to switch over to something called an employer group waiver plan, which signs up retirees for the Medicare benefit as a group and is typically administered by an insurer or PBM. “David B. Snow Jr., Medco’s chief executive, said in an interview that “the majority of the customers feel a sense of [having made a] promise that they don’t want to break” by dropping retiree benefits. “Will some do that? Probably,” he said. “I definitely don’t think it’s the majority.”