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We Should Keep This Part of Obamacare

By Brian Orelli, PhD – Feb 24, 2014 at 6:49PM

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Decoupling health care from employment is a good move.

Even if you hate Obamacare because you think the government shouldn't be subsidizing health care, or because you don't want the government requiring you to carry health insurance, it's hard to argue that one aspect of the law is ultimately good for everyone. According to the Congressional Budget Office, Obamacare will result in the equivalent of 2.5 million fewer people working full-time jobs by 2024.

That's good?
Notice I said "fewer people working." They'll actually be choosing not to work because their health insurance is no longer tied to their ability to be employed full time.

I call that freedom.

How many people could have retired early, but worked until they're 65 just to keep their medical insurance until they could qualify for Medicare? Now, those people could work part time, or not at all, and buy insurance from the exchanges.

How many self-employed people have spouses that work solely so their family can have medical insurance? They could stay home with the kids, or join the family business, and buy insurance from the exchanges.

Ultimately, those people choosing not to work is good for the rest of us, because there are fewer people competing for the same jobs, giving workers bargaining power.

In addition to those who will stop working, people will be able to start new companies without having to worry about health insurance. Now, founders can leave their job and just get insurance from the exchanges. And they can attract top talent without having to figure out a way to get coverage for their small businesses, which typically have higher costs than larger businesses, because employees can get their insurance on the exchanges, as well

Like I said, freedom.

Tied to the mandate...
Unfortunately we can't just uncouple the insurance from employment. The two are intimately tied together because, when it comes to insurance, there's power in numbers; sick people with preexisting conditions are countered by the large number of relatively well people who are unlikely to generate as much health-care expenses as they pay in premiums. Essentially, by offering health insurance to all full-time employees, employers are actually creating a mandate, which keeps the cost down.

Before Obamacare, people who didn't have insurance through their employers were able to get individual insurance plans, but only if they didn't have preexisting conditions. If health insurers, such as UnitedHealth Group (UNH 0.80%), Aetna (AET), and WellPoint (ELV 1.16%), had allowed people with preexisting conditions, they'd overwhelm the insurance pool, driving up costs. This would discourage the well people from getting insurance.

Now, United Health, Aetna, WellPoint, and the rest of the insurers are required to take everyone, which decouples health care from employment. Costs are kept down because the mandate requires the healthy people to carry insurance, too.

...which is tied to the subsidies
Unfortunately, we can't just have the mandate because there's a large number of people who can't afford health insurance. The only way to get them into the system is to have the government subsidize their health insurance.

In theory, new taxes and cost savings generated by the law will cover the subsidies, but there's a lot of moving parts that can throw those calculations out of whack. But less people choosing not to work isn't one of them.

Brian Orelli has no position in any stocks mentioned. The Motley Fool recommends UnitedHealth Group and WellPoint. The Motley Fool owns shares of WellPoint. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Stocks Mentioned

UnitedHealth Group Stock Quote
UnitedHealth Group
$539.32 (0.80%) $4.28
Elevance Health Inc. Stock Quote
Elevance Health Inc.
$528.40 (1.16%) $6.06
Aetna Inc. Stock Quote
Aetna Inc.

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