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Obamacare's Hidden Penalty That Could Wallop Your Wallet

http://www.fool.com/investing/general/2014/01/12/obamacares-hidden-penalty-that-could-wallop-your-w.aspx

Keith Speights
January 12, 2014

Got health insurance through your employer? You might think you're off the hook from being smacked by Obamacare penalties. If we were talking about the individual mandate that requires most Americans to obtain insurance or pay a financial penalty, you would be right -- as long as your employer is in compliance with the health reform act's minimum benefits requirements.

But there's a good chance that you will be affected financially by another consequence of Obamacare. And this hidden penalty can be even more painful to your wallet than the individual mandate levy. 

Consequences of following the law
What is this pervasive Obamacare hidden penalty? Higher deductibles. While technically a penalty means punishment for breaking a law, in this case the penalty stems from insurers and employers that comply with the law.

Granted, the text of the Affordable Care Act doesn't have a clause that tells health insurance companies or employers that they must raise their deductibles offered in plans offered to workers. Actually, the law puts a cap on deductibles for small group plans. But for individual and larger employer insurance plans, the language in the health-reform legislation has led directly to higher deductibles.

According to The Wall Street Journal, the average deductible for a bronze plan on the Obamacare exchanges for individual insurance is a whopping 40% higher than the average deductible before implementation of health reform. Deductibles jumped so much in large part because of the added benefit requirements under Obamacare.

These requirements are also driving many employers' health plan costs higher. With those costs rising, companies are being forced to raise premiums dramatically, cut benefits, and/or resort to other options. Bumping premiums up is one of the most likely of those other options.

Getting creative
No employer in its right mind wants to tell its work force that they're going to have to pony up lots more money for health insurance premiums. It's basically the equivalent of saying, "Here's a nice pay cut for you." What many organizations are choosing to do is increase deductibles to keep premiums from going up too much. Employees still end up paying more -- but it's not as obvious.

UPS (NYSE: UPS) took another approach to help control insurance costs. The big shipping company kicked around 15,000 working spouses off employees' coverage in 2012. Big Brown attributed the move largely to the impact of the Affordable Care Act.

Other employers opted to move employees to private exchanges, where they are given a fixed amount of money and allowed to shop for insurance from multiple insurers. Darden Restaurants (NYSE: DRI) took this route. The company joined Aon Hewitt's corporate health exchange last year, stating that the move gave workers "the flexibility to choose the level of coverage that best meets their needs at a price they could afford."

This creativity helps somewhat. However, many organizations across the country could adopt the mind-set of businesses in Wisconsin. A recent Wisconsin Manufacturers and Commerce survey of employers in the state found that 54% will pass higher health costs along to employees in some form. Another 22% said they would cut benefits. 

Winners and losers
Who wins and loses as a result of the hidden Obamacare penalty resulting from higher deductibles? The easy answer is that employees lose, since they're paying more out of their pockets. However, there are also less obvious losers.

When individuals pay more of their health-care costs, consumption of services can go down -- especially if those services are considered to be too expensive. That could hurt providers such as hospitals and their suppliers.

Intuitive Surgical (NASDAQ: ISRG), for example, sells robotic surgical systems to hospitals. Some skeptics have raised doubts about whether the value of surgical procedures perfo