Court hears ObamaCare appeal, study says costs will rise

Three judges on the 11th U.S. Circuit Court of Appeals will hear arguments in downtown Atlanta this morning in the most promising legal challenge to ObamaCare. This is the lawsuit filed by 26 states, including Georgia, which led a U.S. district judge in Florida to declare the federal health-reform law unconstitutional. Whatever happens in this appeal, this case is most likely headed to the U.S. Supreme Court.

(NB: I’ll be at the hearing but, because the court doesn’t allow members of the public to bring smartphones or computers inside the building, I’m not sure how soon I’ll be able to post an update.)

With good timing, the management consultants at McKinsey & Company have just released a study about the likely effects of ObamaCare based on a survey of 1,300 employers. Grace-Marie Turner, head of the free-market Galen Institute, explains in a Wall Street Journal op-ed that McKinsey believes the law is going to lead to a lot more employers dropping health insurance — and passing costs on to taxpayers — than Democrats let on when passing the law.

The survey…found that up to 50% of employers say they will definitely or probably pursue alternatives to their current health-insurance plan in the years after the Patient Protection and Affordable Care Act takes effect in 2014. An estimated 156 million non-elderly Americans get their coverage at work, according to the Employee Benefit Research Institute. Before the health law passed, the Congressional Budget Office estimated that only nine million to 10 million people, or about 7% of employees who currently get health insurance at work, would switch to government-subsidized insurance.

The optimistic way to read this survey result is that the one-half of employers that say they’ll drop coverage represent smaller firms rather than bigger ones — meaning fewer than one-half of workers (and their families) would be affected. Alas, Turner writes,

Another McKinsey analyst, Alissa Meade, told a meeting of health-insurance executives last November that “something in the range of 80 million to 100 million individuals are going to change coverage categories in the two years” after the insurance mandates take effect in 2014.

Which suggests the optimistic view is unwarranted.

Turner also notes that former CBO director Douglas Holtz-Eakin last year estimated that 35 million more workers than the government forecasts will be shifted onto the ObamaCare rolls — at a cost of some $1 trillion, more than wiping out the alleged deficit reduction Democrats claimed ObamaCare would yield.

Now, imagine if the additional number is closer to 70 million or 100 million Americans: $1 trillion more could become $2 trillion or $3 trillion more.

The McKinsey study (registration required) included an explanation of why its survey showed a higher shift than other ones, including this:

Interest in these alternatives rises with increasing awareness of reform, and our survey educated respondents about its implications for their companies and employees before they were asked about post-2014 strategies. The propensity of employers to make big changes to [employer-sponsored insurance] increases with awareness largely because shifting away will be economically rational not only for many of them but also for their lower-income employees, given the law’s incentives. (emphasis added)

In other words, it seems likely that ObamaCare is not moving us toward a more equal health-insurance scenario, but toward one in which the government pays for more and more middle-income families — who will bear the brunt of efforts to keep the government’s costs down, if there are any such efforts — while companies continue to take care of higher-income folks.

Just like the president and other Democrats sold it, right?

– By Kyle Wingfield

Find me on Facebook or follow me on Twitter