There’s been plenty of criticism on how the Affordable Care Act is hurting businesses now and how it will do so in the near future. But a new report by the Congressional Budget Office (CBO) offers a 10-year outlook that is perhaps the worst criticism of the law yet.
The CBO essentially says the Affordable Care Act will give lower-income individuals some very strong incentives not to work (or work very hard). And this in turn will have dire consequences for employers as well as the economy as a whole.
First CBO acknowledgement
The CBO report is notable because it’s the first time the agency explicitly acknowledged that the health reform law will have a negative impact on the wage-labor relationship and incentives for full-time work.
In a nutshell, the CBO report criticized Obamacare for being an “implicit tax” on workers that will ultimately result in a 2.5 million job reduction in employment over the next 10 years.
‘Disincentive for people to work’
So how did the CBO come to such a conclusion? It all starts with the healthcare reform law’s subsidies, which are provided to low- to moderate-income individuals to help them buy costly health insurance.
Because health insurance is heavily subsidized for low earners and then the subsidies are withdrawn as individuals increase their income, the CBO surmises workers will stay away from higher-paying jobs to maximize their healthcare subsidies.
The report focused on individuals returning to full-time jobs that provide healthcare benefits, but the CBO says the same disincentives apply to employees who are currently employed full-time, covered under Obamacare and looking to increase their take-home pay.
To put specific numbers on this, actuaries said that forgoing subsidies and returning to a full-time position with healthcare benefits — for low and middle-class workers — would result in an implicit tax of 15%, on average, for each worker.
The Congressional Budget Office Director Douglas Elmendorf told the House Budget Committee that:
“By providing heavily subsidized health insurance to people with very low income, and then withdrawing those subsidies as income rises, the (Affordable Care) Act creates a disincentive for people to work, relative to what would have been the case in the absence of that Act.”
Apparently, the Obama Administration is hot about the CBO report. Details here.
This post originally ran on our sister website, HRBenefitsAlert.com.