The news media is full - of - stories recently about how Delta airlines is complaining that Obamacare is going to cost them $100 million. In a dense, two page letter, Delta goes on to explain the cost breakdown, and includes a comment at towards the end that "the cost of providing healthcare to our employees will increase by nearly $100,000,000 next year."
Needless to say, this is being seized upon by opponents of Obamacare as proof that the affordable care act is going to wreck the economy. But does Delta Airlines really say the costs are due to the burden of the Affordable Care Act? Or is Delta's primary complaint really the end of a $5 billion temporary subsidy program? Let's look more closely at the letter and see...
The letter breaks the costs down as follows:
1. A $63 per participant reinsurance fee. This is a true cost of Obamacare, and across Delta's 160,000 insured it adds up to $10 million. Delta does not say if it or its employees will pay this cost, however.
2. $14 million to insure children up to age 26. Delta claims that these children are more expensive than other children they cover, but does not give details. Delta goes on to say that this will increase "our overall costs", but it does not clarify who "our" is: is it just Delta, or Delta and its employees? Earlier in the document, when it introduces the list of costs, it says "for both companies and our employees", which opens the possibility that this cost will be borne by employees who seek additional insurance.
3. $14 million to insure people who would not have signed up for insurance except for Obamacare's penalty for individuals who do not have insurance. Note that the penalties in 2014 are fairly small (starting at $95), so it seems suspect that it really is inducing that many people to sign up. Delta does say this increment in costs is net of premiums paid by the newly insured. Note that these people are, presumably, already eligible for insurance, and the ACA is just nudging them to take advantage of it. Regardless, Delta does not actually know this cost, they are just estimating it. It could be a lot less.
4. Unknown and possibly $0 cost of having the insurance requirement affect employees who work 30+ hours a week instead of 40+ hours a week.
5. Unknown and possibly $0 cost of being caught on a technicality where their insurance plan doesn't meet all regulations.
6. Unknown and possibly negative cost (i.e., savings) of eliminating "cadillac" plans to avoid surcharges in tax.
7. $27 million due to the end of a temporary federal subsidy for insurance for early retirees. Delta makes only the briefest mention of this ("combined with normal medical inflation and the end of the ERRP program"). That this was a huge subsidy is nowhere to be found in the letter, and you will need to follow my link to see the government documents on the payout (search for Delta).
8. Inflation
So, we have, in summary:
1. $63 per employee in an actual tax, or $10 million.
2. Up to $28 million for people either already added or about to be added to the insurance rolls.
3. $27 million due to the expiration of a government subsidy
4. Inflation (which we can estimate to be about $35 million)
In short, Delta's $100 million is roughly 1/3rd increased costs, 1/3rd end of a government subsidy, and 1/3rd inflation. And for the increased costs, Delta is insuring somewhere around 16,000 additional people. So let's be clear, Delta's letter is every bit as much a complaint about the end of a $5 billion Obamacare handout (the Early Retiree Reinsurance Program) as it is about the additional costs of the ACA.
There's no doubt that Obamacare increases costs for companies, or that the law could be improved dramatically. But the argument being made is that Delta's entire $100 million is to be blamed on the affordable care act, and that is far from true.