HEALTH CARE CUTS DON’T BOOST WAGES -WORST WILL COME IN NEXT FIVE YEARS

HEALTH CARE CUTS DON’T BOOST WAGES

Employers: Feds don’t understand how companies make salary decisions

Companies aren’t paying workers more as they cut spending on health benefits, a trend that threatens to undermine the key estimate of the funding for Obamacare, federal data show.

The Congressional Budget Office estimates a controversial excise tax that employers will have to pay on generous health benefits starting in 2018 will raise about $87 billion in revenue over 10 years.

About 75% of the revenue from this “Cadillac tax” is supposed to come from taxes on the higher wages workers are supposed to get as companies slash their benefits to avoid paying the tax. The other 25% or so is expected to come from the tax itself.

Companies will have to pay 40% of the value of benefits over a certain threshold.

“How CBO is scoring this is completely flawed,” says Brian Marcotte, CEO of the National Business Group on Health, a nonprofit that represents employers. “It really reflects a lack of understanding how companies make wage decisions.” This revenue is supposed to help fund the Affordable Care Act’s expansion of health care to millions of people and to keep the law from adding to the deficit.

Companies have a vested interest in killing and undermining the tax, which labor groups have targeted for years and many politicians from both parties oppose. Employers blame the tax for the increasing share workers pay for their benefits, and they don’t want to shock workers with a sudden drop in benefits in two years.

Survey findings vary, but it’s clear at least a third to one half of all employers have health plans that would trigger the tax in the next five years if they didn’t shift more of the costs to employees.

A huge drop in benefit growth rates in 2011 clearly enabled employers to increase wages at that time, says former Labor Department economist and official Mark Wilson. Wage growth should have picked up as the unemployment rate dropped to 5% since then, he says, and Bureau of Labor Statistics data show it hasn’t.

Wages make up about 70% of total compensation, and benefits account for about 30%, so the percentage point changes in the rate of growth in wages and benefits don’t mirror each other, says Wilson, chief economist for the business-funded American Health Policy Institute.

Marcotte says companies may reinvest money they get from paying less for benefits or might add to retirement accounts or start life insurance policies moves that don’t lead to higher tax revenue.