Obama Care: A Very Convenient Pinata

Have you ever grabbed a stick and taken a swing at a pinata? They are the colorful, decorative containers of sweets that hang from ceilings at children’s parties. Blind folded guests swing wildly at the dangling targets, and if they manage to strike the containers squarely, candy pours out and cascades across the floor.

Apparently, the Affordable Care Act (ACA) has become a pinata for every individual who has a complaint about the American health care system. Even those with liberal and progressive beliefs have begun to take wild swings at this target with the hope of generating sympathy for their own positions and opinions.

Consider, for instance, the Human Resources Department of Harvard University. In order to defend its decision to require Harvard employees to pay for more of their health care benefits, it published a 2015 Benefits Guide that blamed the ACA by noting that: “the Affordable Care Act (imposes) added costs to plan sponsors like Harvard.”

After reviewing the Benefits guide, faculty members condemned the University’s decision to increase their share of health care costs. Their vote, in turn,  drew the attention of conservative and progressive news organizations that noted that a liberal bastion of support for universal health care was turning against the ACA.

But those news organizations might have read the Harvard 2015 Benefits Guide more closely. After blaming the ACA for the “added costs” of employee health care, the Guide listed four illustrative bullet points to support its statement.

So why are those four points so news worthy? To put it simply, they don’t support Harvard’s assertion that the ACA has “added costs” to its benefit plans. The first point, in fact, fails to account for a significant countervailing trend. The second point fails to address cost levels from an incremental perspective. The third point is vague and unsubstantiated. And the fourth is irrelevant.

What, specifically, are these four points? The first one asserts that the ACA requires all employers to extend “coverage for children (of employees) up to the age of 26.” That is indeed true. Harvard undoubtedly employs people with adult children younger than 26 who need health insurance from the university; this coverage requirement does indeed drive up the institution’s benefit costs.

However, prior to the passage of the ACA, all universities provided health care benefits to their full-time students and graduate assistants below age 26. A university as large as Harvard undoubtedly provided coverage to hundreds (or perhaps even thousands) of individuals in this age group.

So, in order to quantify the net incremental cost of this ACA requirement to Harvard, the number of “adult children of employees below age 26 who now require Harvard to extend coverage to them” would need to be off-set by the number of “graduate students and other employees below age 26 who no longer need health benefits from Harvard because they can now obtain such benefits from their parents’ employers.”

It is, in fact, possible that the second number is larger than the first number. And if that is true, then this first bullet point may actually represent a “cost saver,” and not a “cost driver,” for Harvard.

And what is the second bullet point of the four in the Benefits Guide? It is a statement that the ACA requires “preventive care (to be) fully paid by the University.” Indeed, if Harvard had not been paying for their employees’ preventive care services prior to the implementation of the Act, this ACA requirement would indeed represent a new cost burden for the institution.

Nevertheless, it is safe to assume that Harvard’s health care plan has always covered such costs. Thus, this ACA requirement cannot now be generating an incremental cost burden for the University, above and beyond what Harvard would have expended without the passage of the ACA.

And what of the third and fourth bullet points? The third makes note of unspecified “additional taxes and fees that began in 2012, and (that) are ongoing.” And the fourth refers to “a potential 40% excise tax … which is scheduled to go into effect in 2018.”

How do these points support the notion that the ACA significantly impacted Harvard’s health care cost structure? The third point, being vague and unsubstantiated, does not appear to do so at all. In regards to the fourth point, why would cost levels in 2015 (i.e. today) be impacted by a potential tax that does not take effect until 2018? The notion appears to be implausible.

So if none of Harvard’s four points actually supports its assertion that the ACA is driving up its employee benefit costs, why did the University’s Department of Human Resources make that assertion in the first place? Perhaps because Obama Care, in essence, has become a very convenient pinata for every individual who is unhappy about a feature of the health care system in the United States, such as decisions by employers to increase the cost sharing burdens of their employees.