ObamaCare's Incentive to Drop Insurance - Unintended Consequences?

This article in the WSJ was written by Philip Bredesen, a Democrat, who is the governor of Tennessee. He makes a good case that ObamaCare is constructed in a way that makes it financially beneficial for most employers to dump their employee medical coverage onto the government exchanges. In so doing, the subsidies spelled out in the bill will spiral out of control.

The question is, did Obama and the Democrat Congress know this when they enacted the legislation? What you will have here is total control of our health care system by the government. Unintended or coldly calculated? Even one of their own, the Democrat governor of Tennessee, has his doubts.

After seeing the strong-armed tactics used to pass the bill, I go for "coldly calculated".

Excerpt: This past spring, the Patient Protection and Affordable Care Act (President Obama's health reform) created a system of extensive federal subsidies for the purchase of health insurance through new organizations called "exchanges." The details of these subsidies were painstakingly worked out by members of my own political party to reflect their values: They decided who was to benefit from the subsidies and what was to be purchased with them. They paid a lot of attention to their own strategies, but what I believe they failed to consider properly were the possible strategies of others.

Our federal deficit is already at unsustainable levels, and most Americans understand that we can ill afford another entitlement program that adds substantially to it. But our recent health reform has created a situation where there are strong economic incentives for employers to drop health coverage altogether. The consequence will be to drive many more people than projected—and with them, much greater cost—into the reform's federally subsidized system. This will happen because the subsidies that become available to people purchasing insurance through exchanges are extraordinarily attractive.

Our thought experiment shows how the economics of dropping existing coverage is about to become very attractive to many employers, both public and private. By 2014, there will be a mini-industry of consultants knocking on employers' doors to explain the new opportunity. And in the years after 2014, the economics just keep getting better.

The consequence of these generous subsidies will be that America's health reform may well drive many more people than projected out of employer-sponsored insurance and into the heavily subsidized federal system. Perhaps this is a miscalculation by the Congress, perhaps not. One principle of game theory is to think like your opponent; another is that there's always a larger game.

ObamaCare's Incentive to Drop Insurance