Mythbusters: Busting Eight Myths on the Affordable Care Act and The Economy/Premiums/Deficits
MYTH #1: The Affordable Care Act has been “killing jobs” and undermining the private health care industry.
FACTS: Since the health care law was enacted in March 2010, 7.4 million private sector jobs have been created – many of them in the health care industry.
Many jobs, including health care jobs, have been created since the health care law was enacted:
- 7.4 million private sector jobs have been created since the health care law was enacted in March 2010. In sharp contrast, under the eight years of President Bush, we lost private sector jobs – losing a total of 653,000 private sector jobs.
- Of the jobs created since the health care law was enacted, 900,000 of them have been in the health care industry.
- The health care law makes key investments in health care jobs – including critical investments to increase the number of health care providers and strengthen the primary care workforce. Specifically, it makes investments to help alleviate the current shortage of primary health care providers, including physicians, physician assistants, and nurses. These investments can help make sure that our growing and our aging population can find a primary care doctor when they need one.
MYTH #2: Under the ACA, most employers will drop the coverage they currently provide to their employees and instead shift their employees into the new Marketplaces.
FACTS: This is not true. Indeed, the exact opposite has occurred in Massachusetts. Massachusetts has seen an increase in the percentage of employers offering coverage since health reform was implemented. The percentage of employers offering coverage rose from 71.1% in 2005 (the year before reform was enacted) to 72.1% in 2011 (the latest available) – while nationally, the percentage of employers dropped from 64.0% in 2005 to 58.3% in 2011. In addition, CBO estimates that ACA will continue the employer-based system we have today and that the vast majority of those with employer-based coverage now will continue employer-based coverage under ACA.
- Nonpartisan CBO projects vast majority of those with employer-based coverage now will continue that coverage under ACA. There are 156 million Americans in employer-provided coverage today. CBO estimates that there will still be 159 million Americans in employer-provided coverage in 2019.
- For decades, vast majority of employers have voluntarily offered health benefits to employees. 91 percent of firms with 50-199 employees and 99 percent of firms with 200 or more employees voluntarily offer health benefits to their employees – with no employer responsibility requirement. Employers voluntarily offer health benefits today because they want to recruit and retain high-quality employees.
- All the benefits to employers of offering insurance to employees remain strong incentives in 2014 and beyond. There is no reason that suddenly once the ACA is fully implemented that employers will not continue to use their health benefits package as a way to recruit and retain the best available employees. They also want to maintain a healthy and productive workforce. Employers will continue to have the same motivations to offer health benefits in 2014 and beyond as they do now.
- J.P. Morgan estimated that 99% of large employers won’t drop coverage. In response to claims that, due to the ACA, great numbers of employers, including large employers, were going to drop their employee coverage and shift their employees to the Marketplaces, J.P. Morgan estimated that 99% of large employers will not drop their coverage and that it is a “non-issue.”
MYTH #3: The Affordable Care Act and its employer responsibility requirement for employers with 50 or more employees have led to a shift from full-time work to part-time work.
FACTS: Mark Zandi, chief economist at Moody’s Analytics, has debunked this myth. When asked on CNBC if it was correct that ACA had led to a rise in part-time employment, Zandi responded with a “no.” Zandi said of the part-time claim, “I don’t see it in the data.” As the New York Times (10/3) has reported, “Many of the assertions of how the law is slashing hours or encouraging part-time employment are not backed by statistical evidence, economists from across the political spectrum said.” Indeed, part-time workers currently represent 19 percent of total employment – below the post-recession peak of 20 percent and exactly the same as a year ago.
- Since ACA enacted, 91 percent of increase in employment due to full-time work. Over the last 41 months since the Affordable Care Act was signed into law, 91 percent of the increase in employment has been due to full-time work. This pattern has roughly held over the last 12 months, with 86 percent of the increase in employment due to full-time work. (CEA, 9/6/13)
- Part-time workers are same percentage of workforce as a year ago. Part-time workers currently represent 19.0 percent of total employment – below the post-recession peak of 20.0 percent and exactly the same as a year ago. (CBPP, 8/6/13)
- Number of Involuntary part-time workers is lower than a year ago. The story for involuntary part-timers – workers who’d rather work full time – is similar to the story for part-time workers overall. If the ACA’s employer mandate was distorting hiring practices in the way critics claim, we would expect the number of involuntary part-timers to be growing. Instead, the number of involuntary part-time workers has actually DROPPED by 152,000 over the last 12 months. (CEA, 9/6/13)
- The data shows that more than 95 percent of employers have taken no moves to shift to more part-time workers. It is true that there have been anecdotes of a few employers cutting employees’ hours to avoid the requirement to provide health coverage to full-time workers in 2015. But these employers are the exception. A recent survey by the Federal Reserve Bank of Minneapolis found that only 4 percent of companies had shifted to more part-time workers in response to health reform. (CBPP, 8/6/13)
- Only a tiny percentage of workforce that could be subject to this kind of shift. Fewer than 1 percent of employees who work 30-34 hours a week (and thus easiest to shift below 30 hours) are employed by businesses affected by the employer mandate and do not have health coverage now. (CBPP, 8/6/13)
MYTH #4: The Affordable Care Act has been preventing small businesses from hiring, because they do not want to grow to reach 50 employees due to the ACA’s employer responsibility requirement that applies to businesses with 50 or more employees beginning in 2015.
FACTS: Here is how the USA Today (8/21/13) summed up how this claim is untrue: “Small business hiring and confidence about the future are rising, a signal of the economy’s growing strength and diminishing concerns about employee insurance coverage required by the new health care law. Job creation at small companies has almost doubled in the past six months, reaching 82,000 jobs at firms with 49 or fewer employees in July, payroll processor ADP says. … The gains are beginning to shift the terms of the debate over the health care law. [The employer responsibility requirement] has not deterred hiring as feared, some economists now say.”
- Vast majority of employers with 25-49 employers, who might be impacted by 50-employee threshold, already offer health coverage. It is employers with 25-49 employees who could potentially be thinking about the 50-employee threshold and how not to cross it. But the vast majority of employers with 25-49 employees (85%) already offer health coverage to their employees. So the ACA does not create a disincentive for these employers to hire a 50th employee. Specifically:
- Past claims that other key laws with employee thresholds would deter employers from hiring workers have not come true. There are already numerous labor and civil rights laws that only apply to businesses with a number of employees over a certain threshold. When many were passed, there were claims that employers would work to avoid having to comply with the new law by refusing to hire workers above the threshold but this has never happened.
o Family and Medical Leave Act only applies to firms with 50 or more employees.
o Age Discrimination in Employment Act only applies to firms with 20 or more employees.
o Title VII of the Civil Rights Act only applies to firms with 15 or more employees.
MYTH #5: The Affordable Care Act, with its employer responsibility requirement, places unfair and expensive new burdens on most of America’s businesses. In particular, the ACA will make health coverage much more burdensome for America’s small business owners.
FACTS: Under the ACA, no business is required to provide health insurance. Instead, only for businesses with 50 or more employees, there is an “employer shared responsibility requirement.” Under the ACA, all businesses with fewer than 50 employees – 96 percent of America’s businesses – have NO employer shared responsibility requirement. Furthermore, rather than placing burdens on small business owners, the ACA has numerous provisions that will give small businesses new options for providing quality, affordable health coverage to their employees if they wish.
The changes in the ACA are an improvement over the current market where small businesses have had many problems obtaining affordable insurance up until now. For example, currently small businesses pay 18 percent more in premiums than large firms for the same benefits.
Under the ACA’s “employer shared responsibility requirement,” businesses with 50 or more employees that don’t offer affordable health coverage and have at least one full-time employee receiving a premium tax credit in the new Marketplaces will have to pay a penalty. However, currently, 91 percent of firms with 50-199 employees ALREADY voluntarily provide coverage to their employees and 99 percent of firms with 200 or more employees do.
Below is a quick overview of some key provisions regarding businesses in the ACA.
Beginning in 2015, For Businesses with Fewer than 25 Employees:
- There is no employer shared responsibility requirement.
- There is a two-year sliding-scale tax credit to help small businesses with average annual wages of less than $50,000 afford to offer employee health insurance coverage. The credit is worth 50 percent of a small business’s premium costs in 2014, an increase from 35 percent in 2013. (The credit is permanent, but a business may only claim it for two years.)
- There is a Small Business Health Options Program (SHOP) in each state – a Health Insurance Marketplace for small businesses – to make health insurance affordable and accessible for small businesses. By being given the ability to join a large pool, small businesses will now have access to the same types of quality, affordable coverage that only large firms have today.
Beginning in 2015, For Businesses with 25-49 Employees:
- There is no employer shared responsibility requirement.
- There is a SHOP in each state that will make the purchase of health insurance affordable and accessible for these small businesses. By being given the ability to join a large pool, small businesses will now have access to the same types of quality, affordable coverage that only large firms have today.
Beginning in 2015, For Businesses with 50 or More Employees:
- There is a shared responsibility requirement for businesses with 50 or more employees. Under the requirement, businesses with 50 or more employees that don’t offer affordable health coverage and have at least one full-time employee receiving a premium tax credit in the new Marketplaces will have to pay a penalty.
- Currently, 91 percent of firms with 50-199 employees ALREADY voluntarily offer coverage to their employees and 99 percent of firms with 200 or more employees do.
MYTH #6: The Affordable Care Act “is driving up the cost of health care.”
THE FACTS: Since the enactment of the health care law, overall health care spending growth has slowed and generally premium increases have slowed. In addition, the law is creating savings for consumers.
Since the Affordable Care Act was enacted, the growth in overall health care spending and Medicare spending has decreased to record lows:
- Overall U.S. health care spending grew at historic lows for a fourth consecutive year in 2012.
- Between 2010 and 2012, Medicare per beneficiary spending rose by only 1.7 percent annually, dramatically more slowly than the period between 2000 and 2009.
- Medicaid per beneficiary spending actually dropped by 1.9 percent in 2012.
- As a result, Medicare and Medicaid will now spend $700 billion less over the 10-year period 2011 through 2020 than previously projected.
- Nearly $15 billion in fraudulent Medicare payments has been recovered on behalf of U.S. taxpayers over the last four years – primarily due to new tools to crack down on fraud in Medicare contained in ACA.
Also, since the Affordable Care Act was enacted, the growth in many premiums is at record lows:
- The average projected premium for Medicare Advantage enrollees in 2013 is 10 percent lower than the average premium in 2010.
- The average premium for Medicare Part D will remain stable for the fourth straight year in 2014 – projected to be $31. For the last three years – plan years 2011, 2012 and 2013 – the average was $30.
- The premium for Medicare Part B will not go up in 2014 – remaining at $104.90, the 2013 level. Premiums for Medicare Part B have either decreased or stayed the same for the past three years.
- Annual premiums for employer-sponsored health coverage for an employee increased by only 3 percent in 2012 – the smallest increase since 1996.
Finally, the ACA is creating savings for consumers:
- This past summer, 8.5 million Americans benefited from $500 million in consumer rebates provided due to the ACA. Insurers were required to provide rebates if they failed to spend at least 80% of premiums on health care.
- The ACA’s rate review provisions have already helped save Americans an estimated $1 billion on their premiums. Rate review requires insurers to publicly justify any double-digit premium increases they are seeking. Since rate review took effect, the share of double digit premium increases requested by insurers has plummeted from 75% in 2010 to 14% so far in 2013.
MYTH #7: Beginning in 2014, Americans buying their health insurance in the new Marketplaces will be paying skyrocketing premiums.
THE FACTS: There is increased competition in the new Marketplaces, leading to new and affordable choices for consumers. A recent report found that consumers will be able to choose from an average of 53 health plans in the Marketplace. As a result of the increased competition, premiums nationwide are 16 percent lower than originally expected, even before taking tax credits into account. Furthermore, the premium tax credits will lower people’s costs significantly further. CBO estimates that more than 80 percent of Americans in the Marketplaces will be receiving these premium tax credits to lower their costs.
- Most people in the new Marketplaces won’t pay more for insurance – due to premium tax credits. An overwhelming majority of people who sign up for coverage in the new Marketplaces will receive tax credits that will give them a break on the cost of their plan. The CBO estimates that more than 80 percent of people who get their coverage through the Marketplaces will receive these tax credits, and the average credit will be more than $5,000 a year, or more than $400 a month.
- People in the new Marketplaces will also be getting better benefits, which will result in lower out-of-pocket costs. Beginning in 2014, people who buy their health insurance in the Marketplaces will have access to prescription drug coverage, maternity coverage, and mental health coverage – benefits that are often excluded from individual market plans today. Individuals in the Marketplaces will also be protected from being dropped or charged more if they have a pre-existing condition, and they will be protected from potentially devastating health care costs because of new caps on out-of-pocket spending and the ban on annual and lifetime limits on coverage.
- Everyone in the new Marketplaces will benefit from unprecedented transparency and competition. The Health Insurance Marketplaces will finally provide consumers with a straightforward way to compare quality plans, side-by-side. Because of the increased competition, a report has found that the average premium nationally for the second lowest cost silver plan will be $328 before tax credits, or 16 percent below projections based off of Congressional Budget Office estimates.
- Across the country, premium tax credits will make available affordable premiums for those with income up to 400 percent of poverty. Below are a few examples.
o How premium tax credits make premiums affordable in Florida. In Florida, a 27-year-old who makes $25,000 per year will pay $96 per month for the lowest cost bronze plan and $145 per month for the second lowest cost silver plan, taking into account tax credits. Similarly, a family of four in Florida with an income of $50,000 per year will pay $104 per month for the lowest cost bronze plan, taking into account tax credits.
o How premium tax credits make premiums affordable in Ohio. In Ohio, a 27-year-old who makes $25,000 per year will pay $110 per month for the lowest cost bronze plan and $145 per month for the second lowest cost silver plan, taking into account tax credits. For a family of four in Ohio with an income of $50,000 per year, the lowest cost bronze plan will cost $156 per month, taking into account tax credits.
o How premium tax credits make premiums affordable in Pennsylvania. In Pennsylvania, a 27-year-old who makes $25,000 per year will pay $109 per month for the lowest cost bronze plan and $145 per month for the lowest cost bronze plan, taking into account tax credits. For a family of four in Pennsylvania with an income of $50,000 per year, the lowest cost bronze plan will cost $152 per month, taking into account tax credits.
o How premium tax credits make premiums affordable in Iowa. In Iowa, a 27-year-old who makes $25,000 per year will pay $96 per month for the lowest cost bronze plan and $145 per month for the second lowest cost silver plan, taking into account tax credits. For a family of four in Iowa with an income of $50,000 per year, the lowest cost bronze plan will cost $103 per month, taking into account tax credits.
MYTH #8: The Affordable Care Act “is increasing the deficit.”
FACTS: According to the latest available estimates from CBO, the health care law reduces the deficit by $109 billion over the next 10 years and over $1 trillion over the following decade.
Since the health care law was enacted in March 2010, the nonpartisan Congressional Budget Office has consistently estimated that the law would reduce – not increase – the deficit.
- The latest available estimate from the nonpartisan CBO on the overall impact of the health care law on the deficit is from July 2012, when CBO estimated the impact on the deficit of H.R. 6079, the House Republicans’ 2012 bill to repeal the health care law.
- In its July 2012 estimate, CBO estimated that the 2012 GOP bill to repeal the health care law would increase the deficit by $109 billion over the next 10 years and over $1 trillion over the following decade.
- In May 2013, the last time House Republicans brought a full repeal bill to the House Floor (H.R. 45), CBO sent a letter to Congress, stating “CBO and JCT most recently estimated the budgetary impact of repealing the ACA in July 2012. … Although CBO and JCT have not updated that estimate to reflect the most recent baseline projections, we anticipate a similar result were we to do so.”