In the summer of 2008, the Obama-Biden presidential campaign ran the most-aired ad of the decade, “Unravel,” alleging that Sen. John McCain’s policy proposals would dismantle employer-based health coverage. Twelve years later, that ad takes on an ironic tone for President Obama’s vice president. As I outline in a new report, Joe Biden’s health plan could pull apart the system by which most Americans receive insurance.
The collapse would come as a result of two interlinked provisions in the Democrat’s plan. Mr. Biden proposes to increase subsidies for ObamaCare exchange plans—decreasing the percentage of income households must pay in out-of-pocket premiums, and increasing the cost-sharing assistance provided for deductibles and copayments. He would also repeal an ObamaCare provision that prohibits households that are offered “affordable” health coverage by their employer from receiving exchange subsidies.
To illustrate the effects, consider a family of four earning 250% of the poverty line. In 2018 this household would have earned $61,500 and paid an average of $5,431 for family coverage from an employer, with an average deductible of $2,961. But under a subsidy regime referenced in Mr. Biden’s plan, and originally proposed by the Urban Institute, that same family would have paid $3,690 for a plan with a deductible of only $1,000. Even after the tax preference for employer-provided insurance, the family could see savings of $2,236 a year, or nearly $200 a month.
The combination of lower premiums and deductibles would encourage significant switching from employer insurance to the exchanges. Virtually all households with incomes below 200% of the poverty line could save more than $100 a month, and some above that threshold would save, too. Assuming that a great majority—say, 90%—of households saving at least $100 a month would switch plans, and that half of those saving less than $100 monthly would do so, I find that 24 million Americans would switch out of employer coverage under the Biden proposal.
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Some might find these results a feature, not a bug. Liberals would question why anyone could object to increasing financial assistance for working-class families who struggle to afford coverage. But the change would have significant negative consequences for taxpayers, businesses and those wishing to remain in employer coverage.
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