Welcome to Health Reform Watch, Sarah Kliff’s regular look at how the Affordable Care Act is changing the American health-care system — and being changed by it. You can reach Sarah with questions, comments and suggestions here. Check back every Monday, Wednesday and Friday afternoon for the latest edition, and read previous columns here.
Days until marketplaces launch: 18.
Trader Joe's made a very big announcement this week, one that had nothing to do with Two-Buck Chuck.
The grocery chain, in a memo obtained by the Huffington Post, told part-time employees that it would end their health insurance benefits for employees who work less than 30 hours a week, sending them instead to the new public insurance marketplaces with an extra $500 to help purchase coverage.
“Depending on income earned outside of Trader Joe’s, we believe that with the $500 from Trader Joe’s and the tax credits available under the ACA, many crew members should be able to obtain health-care coverage at very little, if any, net cost,” the company said Thursday in a statement to Bloomberg.
So what does this decision by Trader Joe's tell us about the Affordable Care Act? A few things.
Before we get to that, though, its worth thinking about why Trader Joe's – or any employer – offers health insurance right now.
While health benefits are expensive, companies typically offer them to stay competitive. A robust health plan can go a long way in wooing potential employees – especially when most of the market doesn't offer part-time workers the opportunity to buy coverage.
A healthier workforce can also have a benefit to a company, if they have fewer workers taking sick days and increasing productivity. The tax code gives companies yet another reason to offer benefits: Companies can pay for health insurance with pre-tax dollars, making compensation in the form of these benefits a better deal than the post-tax salaries they pay.
These incentives pre-dated the Affordable Care Act and they will outlast the law, too. The health-care law does add in a whole bunch of other incentives, which could change how employers think about the benefits they offer workers. It requires employers to provide health insurance to all full-time workers if they employ more than 50 people. That increases the incentive to provide coverage.
There are forces working in the opposite direction, too, that decrease employers' incentives to provide health coverage. The health law will eliminate pre-existing conditions, meaning that anyone who does lose coverage will have an option elsewhere, which is not the case today. It also provides subsidies for purchasing private insurance or, for lower-income workers, the opportunity to enroll in Medicaid.
The insurance market under Obamacare, in other words, is supposed to be a friendlier one than what exists right now. And that's what Trader Joe's seems to be betting on with its move: that its workers will see similar options without the grocery store footing the full bill.
Whether this will be true is hard to game out at this point. The Huffington Post did talk to one Trader Joe's worker who estimated that she earned about $20,000 and currently pays $70 a month for a pretty robust health plan. Trader Joe's plans to kick in $500 for each employee, or about $40 per month. So we're looking at a total of $110 to spend on the marketplace each month, if spending holds to the same level as what Trader Joe's workers pay right now.
The rate data we have so far (largely from the Kaiser Family Foundation) suggest that comparable premiums will be available for someone earning $20,000. Using a calculator that Kaiser helped build, it shows that a 25-year-old who makes that much here in the District would pay $85 for a middle-of-the-road plan and $26 for the bare-bones option. Premiums are a bit higher for those who are older, and a little lower for younger subscribers.
As for what Trader Joe's decision means for the health-care law, that's not totally clear either. On the one hand, it likely makes the health law more expensive: Trader Joe's is essentially shifting the costs it used to pay for health insurance onto the federal government. On the other, bigger marketplaces are good for the health law. More subscribers make it more likely that insurers will want to sell and, if Trader Joes' employees tend to be younger, they'll likely help hold down the cost of premiums there.
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