Shopping for Health Insurance Through the Illinois Marketplace

Enrollment is now open for health insurance through the Get Covered Illinois marketplace. Kathleen Falk, Midwest regional director for the U.S. Department of Health and Human Services, tells us what to look for when reconsidering or shopping for a health insurance policy under the Affordable Care Act.

Assessing the ACA

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On Monday, "Chicago Tonight" assessed the impact of the ACA with Dr. David Meltzer, professor of medicine at The University of Chicago Medicine, and Dr. Lee Sacks, executive vice president and chief medical officer for Advocate Health Care.

"The first accomplishment of the ACA has been to increase the number of insured across the country," Dr. Sacks said. "We already see 10 million with coverage, which is a good thing, and that's going to continue to grow. It's also led to insurance reform which has created price transparency in new competition which is going to create new health care products that are more cost-effective, with better quality for the patients in our community."

"It's unquestionable that many people have gained insurance," said Dr. Meltzer. "It's also true that some people have been able to afford insurance and that plan rates have improved for them. On the other hand, the big question in the long run is are we actually going to be able to decrease costs ... while making sure at the same time we continue to provide really excellent care for the sickest people in the nation."

Chicago's premium has only gone up 1.3 percent for 2016, compared with a statewide increase of 6.1 percent. Among the states relying on the marketplace, the average increase is 7.5 percent.

"Premiums are going up in general because costs are going up in general, and health care costs in the United States have been going up for decades," Meltzer explained. "There are real causes of increases in expenditures that are related to technology, utilization, labor, all of those things.

"The reason we hope they would not rise so much is because we also know there's incredible waste. What the Affordable Care Act is hoping to do is help us identify some of the areas where there's waste and eliminate them."

Watch the video to hear our full conversation.

Casey B. MulliganCasey B. Mulligan Unintended consequences

Casey B. Mulligan is a professor of economics at The University of Chicago and author of the book “Side Effects and Complications: The Economic Consequences of Health-Care Reform.” With open enrollment already under way, “Chicago Tonight” spoke with Mulligan about his book that examines the unintended consequences of the Affordable Care Act. 

What are some examples of the hidden taxes of the Affordable Care Act?

There are three major ones and a dozen or so smaller ones. One of them is the employer penalty. … From an economics perspective, it’s a tax and the size of the tax has been underappreciated. It’s supposedly $2,000 per full-time employee per year, but it’s actually more than that. One reason is the index to health care costs, so it goes up every year. … It’s between $2,100-$2,200 and that keeps growing over time.

This penalty is given special treatment in the tax code. Businesses have to earn $3,200-$3,300 [per employee] to pay the $2,100-$2,200 tax because it’s not a deductible business expense. By comparison, if a company’s paying employees or benefits, those are deductible expenses. Its salary equivalent is $3,200. That’s 50 percent bigger than what you see in the headlines and statements about how big the penalties are.

And then another aspect that’s hidden, it’s not owed legally by smaller employers (those with 49 employees or less [with some exceptions]). The White House said a whole bunch of workers don’t work for large employers, but they do have to worry—it is a tax on them because it discourages employers for competing for them.

The reason why employees earn what they do is because of competition for their services based on productivity. And if my employer can’t pay me for what I can produce, then another employer will want to have me. With the penalty [that company with 49 employees] probably won’t want 50 employees. They don’t compete for that 50th employee. 

What about economic side effects on individuals?

We have a lack of competition or the discouraging of competition by penalizing companies for employees, so employees suffer. Another thing it does is it reduced productivity and that reduces wages. The source of competition is productivity. That’s why an employer will bid more for an employee. Employees are less productive because the penalty is hitting different businesses in different ways. So it hits a large business differently than a small business and that maybe causes small businesses to do things large businesses should be doing or vice versa.

It hits employers who traditionally haven’t provided health insurance differently than employers that have provided it … Value creation is sacrificed in order to reduce the harm from a business perspective on these taxes and penalties. That’s productivity loss that shows up in people’s wages and GDP. It doesn’t necessarily show up in employment. 

“I think the major thing that got missed and really totally missed—and not even underrepresented—is the hidden tax on working.”

–Casey B. Mulligan

In an article for City Journal, you said ACA’s provisions would favor certain types of businesses over others. Can you talk about the law’s impact on businesses?

In the book, as well as in the index, I did a good job with the comparison of Dunkin’ Donuts and Starbucks. They have a lot of similarities: they both sell coffee at the retail level but are organized differently. Starbucks is a corporation and Dunkin’ Donuts is a franchise arrangement. Some of these penalties and rules are tougher on franchises than big businesses. It requires franchises to treat all franchises as one common business even if it’s really not one common business. Since they’re subject to more rules and penalties, as a result Dunkin’ Donuts might not want to expand or [may] shut down some locations to free itself of problems. Starbucks wouldn’t have that incentive and as a result Starbucks might take the place of some Dunkin’ Donuts locations, and that’d be fine if that’s what customers wanted. But all of that’s happening due to the health law, not what customers want.

What are some of the positive side effects or outcomes of the ACA?

In some cases there may be too many Dunkin’ Donuts due to old regulations and old taxes. When Starbucks replaces Dunkin’ Donuts it’s actually an improvement. There’s some of that going on and the same with small businesses. Some small businesses would be best [for a specific location] but other taxes and regulations were preventing that and the Affordable Care Act offsets that.

You hear of the ACA spurring entrepreneurship, and there’s a grain of truth to that I included in my estimates. Certain types of businesses that had skilled workers but weren’t good at managing health insurance (or didn’t offer health insurance or put a lot of costs into it), and as a result a bigger business that wasn’t as good at satisfying customers but was better at health insurance moved in. The ACA may have leveled the playing field there. That’ll add to productivity.

The book was written before the ACA was fully implemented and made some predictions about ACA. Have you seen or are you seeing any of those predictions come true?

I predicted in 2016-2017 there’ll be two types of workers: workers who work fewer hours per week and workers who work more hours per week. Certain types of workers, especially those in low-wage jobs, will work less per week when the full penalty and individual mandate is in place…. I’ve seen some of that—I haven’t done the work myself—but I’ve seen [studies on] the low-wage industry and track work over two to three years, and those results show 29 hour or 28 hour weekly schedules.

[As for higher earners working more hours], that’s going to be harder to isolate. A small amount will work 20 minutes more per week, but that’s applied to more people. So it’s actually enough to offset the 29ers—people who were put down to 29-hour weekly schedules so businesses could avoid penalties and punishments. There aren’t a whole lot of these people. In theory, there shouldn’t be a whole lot of them. Then you have tens of millions of high-wage workers, who’ll see more minutes, and since there are many more of them, the total minutes will offset the hours lost among the low-wage group…

I open the book with a story about Mike Smith, who retired at age 61. He was going to retire at 65 but he stopped working four years early, and I think that will be a more common pattern now. One way people make up for that is they’ll say, “OK if I want to retire early, then I’ll work a little harder before I retire,” and that’s where you get the extra 20 minutes of work a week or so.

I think there are going to be studies coming out that look at the average work week and say it hasn’t changed from before Obamacare was enacted. It pushes up the number of hours some people work—like Mike Smith before he retires—and pushes down the number of hours others work. So the average is a wash.

The thing that doesn’t wash is the total number of people working. Mike Smith is not working, so there’s not someone replacing him. I think we’re seeing that as well… People are going out of the labor force as opposed to unemployment. Obamacare is unique among other federal government programs in that it doesn’t give special treatment to unemployment… Whatever the reason you’re out of work, Obamacare doesn’t care. You’ll be penalty free and eligible for goodies based on the basis of you being out of work. 

Anything else you’d like to add?

I think the major thing that got missed and really totally missed—and not even underrepresented—is the hidden tax on working, and I use Mike Smith as an example. If Mike Smith continued to work under Obamacare, the act of his working prevented him from being eligible for assistance from Obamacare. If he kept his job at the auto parts store, he would have had to pay full price to be on the Silver plan. The reason he has to pay full price is because of his job, not because he was rich. A lot of people get confused on this (Parts of Obamacare [are dependent] on income). The Smiths were missing out on assistance because they were working, not because of how much they made. And the solution for them to get the help from Obamacare was to get rid of the jobs. They didn’t have to jump into poverty—for all I know they may be at the same income level before they retired. Getting out of his job opened doors for him.

I call it a hidden tax on the working. It’s not called a tax but it’s entirely the same thing. The assistance is withheld on the basis of employment. No one paid attention to that. No one studied the health law even from positive or negative perspectives. No one pointed out we are sending signals to Mike Smith get out of his job.

Interview has been condensed and edited.

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