| December 13, 2013

It Is What It Is: The Health Insurance Market and Unintended Consequences

In broad context, even Pollyanna would be concerned about the sustainability of the American insurance system, especially after a review of health care news from Washington, D.C., Connecticut, Minnesota, and Oklahoma.

Consider the headline on an Education Week story in late November: “K-12, Colleges Swept Up in Health-Care Debate.” The authors reviewed “ideological battles over the 2010 federal health-care law.”

Fights surrounding “Obamacare” have been well rehearsed in these pages, but the central challenges now are not “ideological” in the generally accepted sense, but rather practical and financial.

Left, right, center, or nonpolitical, government administrators and policymakers are asking how in the world they are going to pay the bills, if the Affordable Care Act (ACA) stays in force.

U.S. Rep. John Kline, R-Minnesota, despairs over “unintended consequences” from the law, including reductions in the quality of insurance. Is that ideological? Maybe it states the obvious—which, in some quarters, is an act of courage these days.

In September, for, I outlined news about institutions of higher education slashing teaching hours for adjunct professors and graduate assistants, to avoid the 30-hour trigger that turns three-quarters employees into full-timers under ACA.

Communications specialists for both the University of Oklahoma and the state regents say they have no knowledge of policy shifts to avoid that mandate. A spokesman at Rose State College in Midwest City reported an effort to limit adjunct faculty hours in such a way as to keep part-time employees in part-time status.

Overall, no hard numbers, yet, but eventually we’ll pin down accurate cost estimates in Oklahoma’s higher education system. Answers will have to come campus by campus. The state regents staff does not monitor such things.

Best guess: In Oklahoma, higher education implementation costs will reach millions (see below for the closest thing we now have to a statewide answer).

So what about the K-12 impact? Beyond Oklahoma, here’s one example of how things are progressing, or regressing:

The superintendent of Connecticut’s Meriden school district says the various coverage mandates will cost his district $4.6 million over time, the equivalent of 58 teaching positions. One strategy is to ask some staff to elect “high(er) wages for non-benefit-eligible positions.” Other possibilities? Eliminate or reduce jobs, or decrease wages in return for insurance coverage.

Turning north, my colleague Tom Seward reported last month that “thirty is the magic number in the Affordable Care Act for hard-pressed Minnesota school districts scrambling to avoid hundreds of thousands of dollars in penalties and new health coverage costs.

“That’s the cut-off that triggers the ACA requirement for schools to provide health coverage to paraprofessionals, cooks, bus drivers, and other non-teaching employees working 30 or more hours a week. It’s also the magic number that triggers the so-called ‘pay or play’ $2,000-per-worker Internal Revenue Service penalty for employers with more than 50 employees who do not provide coverage.”

Watchdog Minnesota “found that 22,800 non-licensed school employees work between 30 and 39 hours per week, making them eligible for required health benefits under ACA, yet vulnerable to reduced hours to get under the magic number of 30.” Another 22,000 work under 30 hours a week.

Minnesota has about 63,000 non-licensed personnel, the employees most at risk of reductions in force, reduced work hours, and lower prospects for benefits. About 18,000 of those (29 percent of the total) are full-timers.

In the Mayfield district, for 20 “paraprofessionals” working more than 30 but less than 40 hours a week, “It came down to spending $157,000 more to provide them with medical insurance, $132,000 in IRS penalties for not extending coverage, or reducing weekly work schedules to 29 hours to avoid the ACA requirement to provide medical benefits.

“The school board voted in June to cut back the 22 employees’ workweek to 29 hours with a $1 an hour increase to help make up for their lost time and compensation.”

Administrators there delayed some cuts after announced delay in ACA mandates, but the issue will arise again, soon.

These snapshots come from Connecticut and Minnesota, but surely things are not as glum in Oklahoma, right?

The answer, complex and incomplete, is pretty grim.

For the private market, Oklahoma may be better off than some states when it comes to absorbing ACA’s market distortions.

Oklahoma Insurance Commissioner John Doak said in late November, “By allowing early renewals, consumers were given the option of keeping their plan for a while longer or shopping for a new one. That decision benefitted Oklahoma consumers and avoided the massive cancellations happening in other states.”

Still, Doak worries about “the next shoe to drop.”

Commissioner Doak pointed to Henry Chao, a ranking official in the Obama administration, whose testimony in late November indicated—in Doak’s words—“as much as 40 percent of the exchange system isn’t even ready! He’s talking about the accounting and payment systems. This is supposed to start in just over a month and right now they can’t even process payments.”

Don’t get sanguine about Oklahoma’s chances to avoid the looming resource assault. Meanwhile, here are the troubling “early returns” on the cost of Obamacare in Oklahoma.

The state Department of Education wants a $59 million increase in spending for the “flexible benefit allowance for local school district education employees”—a cost driven primarily (not exclusively) by ACA costs.

Bill Price, a member of the state Board of Education, talks in layman’s terms: “Obamacare is costing the education system in Oklahoma $59 million. That is reducing the amount available to pay teachers and improve instruction in Oklahoma.”

Superintendent of Public Instruction Janet Barresi says, “Obamacare is costing millions of dollars.”

That’s just K-12 education, accounted separately from benefits for other state government employees, mostly administered by the state Office of Management and Enterprise Services (OMES).

Spokesman John Estus told me, “OMES projects [ACA] has increased state employee health insurance costs by about $54.8 million in aggregate over the course of plan years 2012, 2013, and 2014.”

The $59 million education boost will require legislative action, while initial ACA costs for much of the rest of state government will be handled by “use of reserve funds and increased premiums.”

So, all told then, we’re looking at about $100 million of increased costs—some front-loaded but some spread over the next two years. That’s the start-up cost for our state employees alone. It does not reflect Oklahoma’s private sector, or the rest of America.

Blend in to this troubling recipe accelerating costs for the private sector, including the individual insurance market enduring shocking insurance premium rate hikes both in exchange and non-exchange states.

It is not tasty: If not repealed and replaced, Obamacare is going to cost the American economy trillions of dollars over the next decade alone.

It is what it is.

Patrick McGuigan (M.A. in history, Oklahoma State University) is editor of He is the editor of seven books on legal policy, and the author or co-author of three books, including Ninth Justice: The Fight for Bork. This year the Washington Post political blog, “The Fix,” designated McGuigan one of the three best political reporters in Oklahoma.

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