NCPA - National Center for Policy Analysis

Wisconsin Employers and Workers Suffer under Obamacare

October 2, 2014

The Affordable Care Act (ACA) raises the price of health insurance, affecting the labor market as employers attempt to deal with the rising costs of health benefits. Devon Herrick, senior fellow with the National Center for Policy Analysis, explains how the law is impacting the state of Wisconsin.

Two-thirds of insured Americans have health coverage through their employers. Wisconsin employees are more likely to receive employer-sponsored health benefits than are employees in other states, though the percentage of residents receiving employer-sponsored health insurance has been declining in Wisconsin since 2000:

  • In 2000, 60 percent of Wisconsin employers offered employee health plans, which fell to 50 percent in 2011.
  • In 2000, 72 percent of Wisconsin workers employed in small firms were offered employer-sponsored coverage. That number had dropped to 51 percent by 2010.

The ACA will only contribute to the drop in employer coverage, which has been most prominent among small firms, as costs rise. Health care costs have been on the rise for years; from 2000 to 2011, the average employee premium doubled in price, and family premiums rose by 121 percent. A 2014 survey by Morgan Stanley found that premiums for small employer coverage rose 66 percent in Pennsylvania, 37 percent in California and 30 percent in Kentucky. Wisconsin saw lower, but still significant, increases, with premiums rising 10 percent in 2013 and 9 percent in 2014.

Firms with 50 to 99 workers are required to offer their full-time employees health insurance in 2016. According to the Congressional Budget Office, the cost to provide an employee with health insurance will likely be $5,800 per year or higher in 2016. To think about it in another way, that's equivalent to employers paying a $3 per hour "minimum health wage." Family coverage costs could be twice that amount, says Herrick.

If these firms fail to offer health insurance, what happens? They face a fine (equivalent to $2,000 for each uninsured employee beyond their first 30 employees), meaning that an employer with 50 workers who fails to offer coverage will face a $40,000 fine. How to avoid the fine? Wisconsin employers can reduce their workforce to fewer than 50 employees or limit employees' hours to keep the number of full-time employees below 50. In fact:

  • In 2011, a McKinsey and Company report found that 30 percent of employers will likely stop offering health insurance to employees.
  • A survey by the firm HC Trends determined that 54 percent of small Wisconsin employers renewed their employee health plans early in order to delay compliance with the employer mandate
  • Over 40 percent of small businesses have delayed hiring due to uncertainty concerning the ACA, according to a survey by the Society for Human Resource Management. One-fifth have cut the size of their workforce.
  • In a survey of Milwaukee-area businesses, 6 percent of medium and large employers have reduced some of their workers to part-time, and 22 percent are considering doing so.
  • Wisconsin company Lands' End sent a memo to its workers in 2013 informing them that many employees would see their hours reduced to 29 hours per week as a result of the ACA.

Herrick writes that 10,000 Wisconsin workers will lose, or leave, their employer-sponsored small group insurance plans by 2016 due to the Affordable Care Act.

Source: Devon M. Herrick, "How Obamacare is Affecting Wisconsin's Workers and Employers," National Center for Policy Analysis and MacIver Institute, October 2, 2014.  


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