The consequences of the ObamaCare are starting to be felt in Minnesota. Early this month, 3M announced plans to drop health care coverage of its retirees. According to the Wall Street Journal, the company “confirmed it would eventually stop offering its health-insurance plan to retirees, citing the federal health overhaul as a factor.” President Obama often proclaimed, “If you like your health insurance, you can keep it.” So much for that.
On an abstract level, it’s actually good for 3M and other employers to get out of the health-insurance business. We shouldn’t expect our employers to choose our health insurance plans any more than we expect them to choose our dinner menu. Employer-based coverage is a legacy of the price controls imposed during World War II. Employers started offering health insurance as a way to get around wage controls, and the whole health industry has been filled with an action/reaction dynamic based in large measure on government programs and regulations.
In the case of 3M, people who are old enough to be eligible for Medicare will be steered into that program. Taxpayers, of course, will incur new financial risks. Congress anticipated that risk and attempted to manage it, but at least in the case of 3M, failed. We will, I predict, see many employer follow 3M’s example. As a result, the obligations of taxpayers will increase, and fiscal reality will be a pressure to reduce benefits to people already in the system. 3M retirees not old enough for Medicare will be able to spend their HRA money in federal health insurance exchanges–again, abstractly a good idea, but the exchanges won’t be a well-functioning, lightly-regulated private market. Instead, they’ll be a government-controlled quasi-market. In sum, while employer-sponsored plans have been a sub-optimal way of providing insurance, they have been better than many government plans (ask your doctor if he would like to be a Medicaid patient). Yet the new law has set in a dynamic that will over time reduce consumer options and increase the role of government in health care.
Meanwhile, according to the Pioneer Press, children-only policies in Minnesota will soon be a thing of the past. It says, “The new law prevents insurers from issuing new policies that exclude children based on pre-existing conditions. But the requirement has been controversial with insurance companies because they fear families will wait to buy health insurance until a child gets sick.” So now we’ve got yet another incentive for an insurer to leave the market–and push more people into the arms of governments, which are sinking under the weight of increasing obligations. One possible result: benefit cuts to the truly needy, whose dependence on government programs will soon be overwhelmed by a middle class population that formerly found its needs met in the private sector.