Widening Inequality Under the Affordable Care Act

I’ve written previously about how the Affordable Care Act (ACA) is particularly bad for union workers, noting that union employees who currently receive their insurance through non-profit health insurance plans (known as Taft-Hartley plans) will not be eligible for tax subsidies to help pay for insurance (though these union plans will be taxed to help pay for other peoples’ subsidies).

Now, against the backdrop of President Obama’s renewed focus on economic inequality, comes a report produced by UNITE HERE, a hospitality industry union representing nearly 300,000 workers, that argues the ACA will worsen income inequality in this country.

The report, “The Irony of ObamaCare: Making Inequality Worse,” claims that in the wake of “the negative fallout from the rollout of the ACA,” the White House and Congressional Democrats are “resetting” the domestic agenda to “shift focus from health care to bread and butter issues of income inequality that have eroded the American paycheck for decades.”

Far from working to lessen inequality and improve Americans’ economic health and freedom, the report says the president’s signature piece of legislation “poses one of the most immediate challenges to redressing inequality” because the unintended consequences of the ACA “will hit the average, hard-working American where it hurts: in the wallet.”

The report claims the ACA will actually limit access to health insurance by strangling fair competition in the health insurance market through unfair rules and regulations. With only health insurance plans offered through the exchanges eligible to receive federal subsidies, the ACA reduces competition in the health insurance market by prohibiting Taft-Hartley plans and other self-funded plans from being offered through the exchanges.

The ACA also incentivizes employers to reduce workers’ hours. Surveys by the US Chamber of Commerce and the International Franchise Association found that about a third of US franchise businesses have cut workers’ hours, and more than a quarter of franchisers have replaced full-time with part-time workers. A majority of businesses close to the 50-worker employer mandate threshold said they planned personnel moves to stay below 50 full-time workers.

When these workers lose their current coverage, they’ll get hit with what amounts to a pay cut (up to $5 an hour in some cases, according to the report) as they’re forced to pay more for insurance on the exchanges.

“without smart fixes, the ACA threatens the middle class with higher premiums, loss of hours, and a shift to part-time work and less comprehensive coverage.”

Noting that the administration is highlighting “issues of economic inequality without acting to preserve health plans that have been achieving the goals of the ACA for decades,” the UNITE HERE report concludes that,

In a cover letter sent to labor leaders, UNITE HERE head Donald Taylor said the information in the report “addresses the very unfortunate irony of Obamacare. Namely, that it will inevitably lead to the destruction of the healthcare plans we were promised we could keep. And, as a result, it will lead to greater income inequality for the very segment of the population Obamacare should want to help most.”