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Health Care Reform Could Get You A Raise, But There's A Catch

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Under health care reform, employers might pay workers more but drop their health insurance benefits.
Under health care reform, employers might pay workers more but drop their health insurance benefits.

The good news is that health care reform could lead your employer to put a little more money in your paycheck. The bad news is that if they do, it's probably because they aren't providing you with health insurance anymore.

The Congressional Budget Office estimates that 4 million fewer people will get health benefits from their employers in 2016 compared to what the agency projected a year ago. More people will end up on Medicaid, the government health program for the poor, and more companies will decide to stop offering health benefits and let their workers buy their own coverage through insurance "exchanges" the government will establish in 2014. The Congressional Budget Office doesn't estimate how much wages might increase for those who lose company health benefits.

How could this translate into bigger paychecks for workers? Economists consider health insurance to be part of how much companies "pay" workers because fringe benefits cost them money, said Paul Fronstin, director of the Health Research & Education Program at the Employee Benefit Research Institute. If a company decides to stop providing health insurance, they are likely to pay a little more. Companies may choose to offer workers extra money that could be used to help pay for health insurance instead of providing benefits themselves.

The Congressional Budget Office also says this will allow the government to raise more money to pay for health reform because wages get taxed but money spent on workplace health benefits doesn't. Employers that drop workers from their insurance rolls also will pay penalties to the government.

Jobs would remain the most common way for Americans to get health insurance. The new projections about health care reform don't say fewer people overall will get insurance at work, just a smaller number than the budget agency previously thought. This year, 154 million people are covered by their employers and 161 million will be in 2016, the Congressional Budget Office says.

There's no guarantee things will play out that way. Economic and budget projections are constantly changing and the parts of the health care law that are supposed to expand coverage don't exist yet. Moreover, Fronstin said, economists' assumptions about companies treating benefits like pay aren't always accurate in the real world.

"Economists assume it happens but there are examples when it doesn't," said Fronstin, an economist himself. During the recent recession and the sluggish recovery, many employers cancelled fringe benefits like matching payments to 401(k) retirement plans, he said. But they weren't more likely to drop health benefits than they were before the recession, he said.

The Congressional Budget Office has revised its estimates about how much health reform will cost, how many people will get insurance and other effects numerous times since Congress passed it in March 2010. One big reason for the differences is that overall economic projections in areas like employment keep changing, which affects aspects of the law such as how many people will be uninsured in 2014 and beyond and how many people will earn a low enough wage to qualify for Medicaid or for tax credits to help them afford private health plans.

Thirty million people who otherwise would have gone without health insurance will have benefits because of health care reform programs by 2016 and the share of Americans with coverage will rise from to 93 percent from 82 percent, the budget office predicts. Last year, the agency said health reform would expand coverage by 33 million, which would mean 95 percent of Americans were covered. The government will spend $1.1 trillion between this year and 2021 to cover these people, about $50 billion less than the Congressional Budget Office predicted last year.

Photo by flickr user photosteve101

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