An op-ed in this morning’s Wall Street Journal by Tennessee Governor Phil Bredesen – a Democrat – explains very succinctly why employers will drop their existing coverage options once the federal insurance subsidies and exchanges come online in 2014. Gov. Bredesen notes that Tennessee could drop coverage for its state employees, pay the $2,000 per employee penalty/tax to the federal government, give their workers cash raises to compensate for the loss in health benefits, and STILL come out at least $146 million per year ahead. Of course, federal taxpayers would not come out ahead, as they would be “on the hook” for the $146 million-plus in benefits that Tennessee shed on to the federal fisc – meaning that if many employers follow the Governor’s lead, the promised deficit reduction from the health care law will evaporate in a New York minute.
The op-ed echoes former CBO Director Doug Holtz-Eakin’s earlier report indicating that the cost of federal insurance subsidies could be triple official projections, because many businesses would choose to drop coverage for their workers. And Gov. Bredesen’s analysis constitutes the benefits for just for one state with 40,000 employees – but as there are currently about 170 million individuals with employer sponsored insurance, the impact on the federal budget could be MUCH bigger.Recent Blog Posts
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