Secrets of Romneycare

Last week the Wall Street Journal published a column by Elizabeth McCaughey on the fine print in the new Massachusetts law providing for compulsory health insurance. Governor Romney exercised a line item veto over one provision that would have required employers with 10 or more employees who don’t provide insurance to start offering it or pay fees of $295 per employee. The Massachusetts legislature nevertheless overrode the veto, and Governor Romney appears to have been straining at gnats while swallowing camels. In her column McCaughey observes:

Everyone should have access to health care. Massachusetts aims to achieve this goal with a double mandate: All residents must have health coverage (Section 12) and all employers with more than 10 workers must assume ultimate financial responsibility if employees or their immediate family members need expensive medical care and can’t pay for it (Sections 32, 44).

What is the impact on individuals? The state will offer subsidies to help low income residents pay for coverage (Section 19), but most of the uninsured earn too much to be eligible. An individual making $29,000 or more would probably have to pay the full cost or find a job that provides health insurance. Individual coverage costs about $3,600 in Massachusetts — a hefty bill. Moreover, under the new law, individuals purchasing their own insurance must buy HMO policies. Preferred provider plans (PPOs) — which give you more ability to choose your own doctors and treatments — are not allowed (Section 65).

The impact of this law on employers is substantial. The original bill required employers with more than 10 full-time workers to provide all of them (and their families) with health insurance or to opt out of that requirement by paying a $295 annual tax per worker into a state fund. This modest penalty was highly publicized by the bill’s supporters as proof that the bill would not be a heavy burden on businesses. Nevertheless, Gov. Romney vetoed it, perhaps to display his Republican credentials as a tax-cutter.

The Massachusetts House of Representatives overrode the veto — but the reality is that the $295 penalty is small potatoes compared with the other obligations in the law. Say, for example, you open a restaurant and don’t provide health coverage. If the chef’s spouse or child is rushed to the hospital and can’t pay because they don’t have insurance, you — the employer — are responsible for up to 100% of the cost of that medical care. There is no cap on your obligation. Once the costs reach $50,000, the state will start billing you and fine you $5,000 a week for every week you are late in filling out the paperwork on your uncovered employees (Section 44). These provisions are onerous enough to motivate the owners of small businesses to limit their full-time workforce to 10 people, or even to lay employees off.

What else is surprising about this new law? Union shops are exempt (Section 32).

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People should be allowed to buy basic, high deductible insurance without costly extras. The new Massachusetts law allows only people under age 27 to buy such policies (Section 90).

McCaughey’s column is unavailable to nonsubscribers. Brendan Miniter draws what appearst to me to be the appropriate conclusion in an OpinionJournal column that is accessible: “RomneyCare will turn out to be not only expensive but also a mandate for more government spending and more government intrusion.”

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