CBO report highlights how insurance reform is changing workers' choices

Philip Murray works part time as a math and science tutor. But the 33-year-old New Yorker's professional ambition is to develop a software program to help students prepare for the Medical College Admission Test because he sees a big shortage of MCAT tutors.

“I wanted to start a business and fill that void,” said Murray, who attended one year of medical school before dropping out.

Before Oct. 1, when New York state's insurance exchange opened for business, Murray couldn't find affordable health coverage and feared he would have to abandon his goal of starting a software company and instead have to get a job with health benefits. But through the new exchange, Murray said he purchased a plan offered by EmblemHealth, with a monthly premium of $330 and a $3,000 deductible. Counting his federal premium subsidy, his cost fell to only $100 a month.

Now Murray thinks he can fulfill his ambition without worrying that a medical problem could bankrupt him. “It helps me build a business, be productive, get my product out and possibly even hire some help,” he said. “It's a huge positive.”

Murray's situation offers a personal spin on the Congressional Budget Office's report issued last week projecting that the Patient Protection and Affordable Care Act will reduce the total number of hours Americans work by 1.5% to 2% between 2017 and 2024—“almost entirely because workers will choose to supply less labor—given the new taxes and other incentives they will face and the financial benefits some will receive.”

The CBO report discussed the complex decisions Americans make about employment and health coverage and how those dynamics are changing because of the ACA. It concluded that the law will result in a decline in the number of full-time equivalent workers of about 2 million in 2017, 2.3 million in 2021, and 2.5 million in 2024.

The CBO report, its annual budget outlook, also said that 2 million fewer Americans would get coverage in 2014 than previously anticipated, largely because of the troubled rollout of the insurance exchanges. But it projected that private plan enrollment will expand to the previously estimated level of 25 million by 2017. In addition, at least 12 million additional people are projected to qualify for Medicaid by 2015.

The report immediately became fodder in Republicans' drive to capture control of the Senate in the November elections. They said it proved that Obamacare is a job killer—which the report did not say. In fact, the report said “if some people seek to work less, other applicants will be readily available to fill those positions and the overall effect on employment will be muted.”

Meanwhile, the White House and congressional Democrats defended the law as a net positive for the economy and a boon to Americans' freedom to make economic and personal choices. They also noted that the report said exchange plan premiums were 15% lower than forecast, Medicare spending “will be slower than usual for years to come,” and the ACA's risk corridor provision to protect insurers from losses for signing up sicker subscribers would net the government an $8 billion surplus.

The law's coverage provisions will give Americans more freedom of choice, said Sara Collins, vice president of healthcare coverage and access at the Commonwealth Fund. As an example, she pointed to couples who own a small business together and one member works another job simply for the health coverage. In other cases, younger Americans may select the career they truly want or go to graduate school rather than work a job solely for the insurance.

The CBO said the law's premium subsidies and expanded Medicaid program will reduce incentives to work. As people earn more income, they could exceed the income eligibility for Medicaid or premium tax credits. In those situations, some people will choose not to work or will work less.

Congressional Republicans cited the CBO report as proof that the ACA will weaken the economy and hurt job growth. But CBO Director Douglas Elmendorf said during a House Budget Committee hearing last week that the law could lead to job creation since many newly insured Americans would have more disposable income from spending less on healthcare.

In his testimony, Elmendorf made it clear that CBO analysts do not use the term “lost jobs” in their projections because, he said, there's a critical difference between people who can't find a job or lose one and those who choose not to work. He said that when people decide to retire to spend more time with their family or more time doing their hobby, “they feel good about it … and we say congratulations.”

All means-tested programs that phase out at a certain income level contain similar incentives to reduce work, explained Mark Pauly, professor of healthcare management at the University of Pennsylvania. “As your income goes up, your subsidy goes down—and that seems to be driving the reduction in employment,” he said.

Other analysts stress that the law reduces “job lock,” which is widely seen as bad for the economy. “For those individuals who have been 'job locked' because their employer was providing health insurance, the fact that they have alternatives to move out of that job and into an exchange (is) a positive,” said Bill Hoagland, who served as a senior aide to former Republican Senate Majority Leader Bill Frist and now is senior vice president at the Bipartisan Policy Center.

Meanwhile, those Americans nearing retirement who are not yet eligible for Medicare may choose to retire early because they have the option of buying affordable coverage through the exchanges, said Paul Van de Water, a senior fellow at the Center for Budget and Policy Priorities, a liberal-leaning research group.

Despite the expansion of coverage under the ACA, the CBO report said 31 million Americans will still lack insurance in 2024. Of that group, 30% will be undocumented immigrants who largely don't qualify for Medicaid or exchange subsidies. Another 45% will be individuals who have access to affordable coverage through work or the exchanges but opt not to buy a plan.

Joseph Antos, a health policy analyst at the conservative American Enterprise Institute, questioned whether the heated political debate over the CBO findings will have much impact on the 2014 election campaign. “These are basically technical talking points,” he said. “I think what matters to (voters) is what happens to them.”

Philip Murray seems to agree. Even though he did not vote for Barack Obama in either 2008 or 2012, he says he's grateful the government made it possible for him to buy affordable health coverage that will make it easier to pursue his professional goal. “It's the first time the government has done something that's affected me in an extremely positive way,” he said.

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