Recently, Trader Joe's made waves when it announced that it would stop offering health insurance to currently eligible part-time employees (about 17,000 employees) and give them an extra $500 in pay to let them shop for coverage on the new health care exchanges that will open on Oct. 1.
At first glance, this looks terrible: a private company is taking advantage of the Affordable Care Act and dumping workers' benefits to save money -- others surely will soon.
On reflection though, this is probably a good thing. After all, the private insurance market has been unraveling for over a decade anyway. Trader Joe's is still offering benefits to its full-time employees. Health reform hasn't caused the collapse of employer insurance in Massachusetts. Finally, Trader Joe's part-timers will on the balance have access to health insurance for a fair price -- regardless of their future employment.
Like many economic developments, this move creates winners and losers. But we can't stop there: we need to ask two questions: First, who wins and who loses? Second, how much do they win or lose?
Company employees getting sent to the exchanges face a mixed bag: Some will pay less on the exchanges than they would for their current plans, while others will pay more. But the difference won't be that stark: Wonkblog's Sarah Kliff notes that an employee who earns about $20,000 a year will be charged between $26 and $85 a month for insurance on the Washington DC exchange (after subsidies), depending on the plan she selects, which compares favorably with the $70 a month she pays for a "robust" health plan with Trader Joes. The comparison looks even better after factoring in the company's annual $500 payment to help part-time employees currently eligible for insurance afford exchange plans.
Some workers will lose in the change; Trader Joe's own letter points out an example of an employee who will go to the exchanges and have to pay the full premium without federal subsidies. That cost is likely several hundred dollars a month more than he pays under the current structure, but only because his spouse makes $200,000 a year. For a good progressive, the cost shifts seem to work out well -- less well-off people tend to save money, while wealthier ones pay more.
Additionally, every employee affected by the switch actually gains two things. First, they likely gain some more choice for their insurance coverage: generally at least eight to 10 plans at four distinct levels of coverage, depending on the state of residence instead of company plans, which tend to be more limited (though some companies do offer considerable options).
Second, all people who purchase on the exchanges also gain portable health policies. Employees who get sick may to quit their jobs. This situation is perverse; precisely when they need to get insurance, they lose it or have to at least pay the full cost of the premium through COBRA. Insurance purchased on the exchanges doesn't go away when a job does, however.
More broadly, consider the societal costs: Kliff points out that Trader Joe's saves a considerable sum of money by pushing several thousand employees on the exchanges. The federal government, --taxpayers, will have to pick up those costs. But which taxpayers? As it turns out, the wealthiest ones. Obamacare gains that lion's share of its funding from two mechanisms: cutting subsidies to private health insurers for certain types of Medicare plans (i.e. cutting corporate welfare) and by raising the Medicare Hospital Tax on all income earned above $200,000 from 1 to 1.9 percent. Additionally, it put in place a Medicare tax of 3.8 percent on investment income for all earners with more than $200,000.
Let me repeat that: The ACA makes the Medicare tax progressive, it places a Medicare tax on investment income for the first time ever, and it uses the proceeds to help working class individuals pay for health insurance. As David Leonhart of the New York Times argued, this is the most progressive piece of legislation since the Great Society of the 1960s.
On the net then, the move of Trader Joe's to shift its part-time employees to the exchanges is likely to be slightly disruptive at this moment, but only because employees will need to enroll in a new health plan. Over the long term, however with exchange insurance rates coming in at reasonable prices, the shift will be broadly beneficial. Employees who come from poorer families will likely pay a bit less than they do now, thanks to subsidies; while employees from wealthier families will pay a bit more. The subsidies allow Trader Joe's to discharge some of its costs of benefits on the federal government, but those costs are paid for by the wealthiest members of society.
All in all, better times are coming for health care in America.
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