The Affordable Care Act is undermining wage growth
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Curiosity kills the cat, it’s said. Over the summer of 2015, curiosity also consumed hundreds of hours of my time.
 
My question concerned promises that the Affordable Care Act (ACA) would increase the incomes of American employees. “How would that work?” I wondered.
 
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I found myself down a rabbit hole of economic studies, pulling string after string until I found the answer.
 
To be clear: this matter doesn’t affect me personally. I buy my own insurance policy. But it does impact the roughly 155 million people who get health benefits from work.
 
Before the law was passed, the Congressional Budget Office (CBO), the body that evaluates the impact of congressional proposals, projected that pay raises would indeed result from health reform. This would happen, CBO said, when businesses saw savings in the premiums they pay for employee health policies.  
 
The ACA reduces employer premiums through a forty percent excise tax, often called the Cadillac tax, on their plans. Employers hoping to avoid the assessment are offering leaner, less expensive coverage that increases deductibles and copayments. Over time, the tax is expected to target all employer-sponsored plans.
 
CBO assumed that companies would, in turn, pass along premium savings to their employees through increased cash compensation.
 
I remember the morning I realized the foundation upon which CBO had built this assumption, in 1994, when it analyzed the Clinton reform plan, and again in 2008. My jaw literally dropped.
 
CBO relied on research conducted by a bespectacled professor from the Massachusetts Institute of Technology — Jonathan Gruber. 
 
You remember Jonathan Gruber, right? He’s the ACA architect who boasted about fooling CBO and “stupid” American voters in efforts to “get the thing to pass.”
 
“This bill was written in a tortured way to make sure CBO did not score the mandate as taxes,” he said on video. ”Lack of transparency is a huge political advantage,”
 
Gruber’s research suggested that rising health benefit costs are shifted to workers through reduced cash compensation; in no way did Gruber’s work prove the opposite — that lower health coverage costs would boost pay. In fact, I could find only one U.S. study that showed such an offset. But that’s what Gruber pitched to Americans before the law’s passage.
 
After digesting all the “wage-benefits tradeoff” material I could find, I wrote “Questioning Jonathan Gruber’s Wage GrowthPromises,” reviewing this research and describing Gruber’s relationships with CBO. In my conclusion I asked that CBO revisit its wage growth assumption.
 
And in 2016, CBO did. In its March report, CBO “estimates” that the Cadillac tax will “generally result in higher taxable income for affected workers,” but also offers an “opposite assumption,” under which employees would lose value in their plans and receive no wage hikes: 
 
“Under the opposite assumption—that workers’ total compensation would be reduced by the amount of the premium reduction—their employers would have smaller deductions for compensation costs, and hence more taxable income.”
 
In other words, CBO believes companies could just pocket the savings they realize in cutting premiums.
 
The federal government is neutral on how they’ll acquire revenue under the Cadillac tax — they’ll either tax worker pay raises or tax their bosses’ income bumps.
 
I’ll bet the typical worker isn’t neutral on this.
 
I have no idea whether the Cadillac tax will produce wage growth. Most economists and health policy experts believe it will; unions, employers, some health journalists, and average Americans are suspicious. It may be many years before we know. 
 
But if “wage growth” doesn't materialize, as CBO now acknowledges is possible, employees have less comprehensive coverage and spend more in out-of-pocket costs — and experience no offsetting wage increases.
 
I thought it was important that somebody tell them.
 
Dr. Dana Beezley-Smith is a clinical psychologist in private practice, serving children, teens, adults and families in Green, Ohio.

The views expressed by contributors are their own and not the views of The Hill.