Businesses gaming the Affordable Health Care Act

Posted: August 11, 2010 in Health

I had read a bit of discussion about this subject some time ago, which is how business might be motivated to game the Affordable Health Care Act their benefit. But I had not previously seen any example cost numbers to illustrate just how motivated companies might be. I read some today at Huffington Post in a post by a doctor that discussed how the ACA will lead to eventually kill off private insurance.

The tactic for businesses is similar to that for individuals which is to not pay for the mandatory coverage and instead pay the penalty. For individuals the numbers go like this: insurance premiums for the average person are around $4,800 per year while the penalty is only $650 so pay the penalty and only buy insurance when you need it since you can no longer be denied (see my slight crimp post for the one complicating factor). Businesses would do the same thing, stop providing medical insurance for their employees and instead pay the penalty. The one example I saw was AT&T which spends $2.4 billion annually on health insurance for its 300,000 employees. If they instead stop providing health insurance and pay the penalty instead their cost would drop to $600 million. That’s a big incentive, and a classic example of creating a moral hazard.

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