Could The Healthcare Exchanges Get You A Raise?

The CBO estimates that employers dumping lower-income employees onto the exchanges will slightly lower the deficit. Avik S. A. Roy is skeptical:

It appears that the CBO has made a critical assumption in its calculations: that employers who dump health coverage will replace that coverage, on a dollar-for-dollar basis, with increased cash wages.

So, for example, if your boss is paying you $50,000 a year, and spending $20,000 a year on your health insurance, under the ACA, he'll drop your health coverage and give you $70,000 in wages. Since you'd be paying income taxes on that extra $20,000 of wages, whereas you weren't paying taxes on your employer-sponsored health insurance, the CBO estimates that the subsidies you'd get from the exchange are offset by new income taxes on your extra wages.

However, it's far from clear that it would work out this way in reality. Under the ACA exchanges, that $50,000 worker would get a premium subsidy of about $12,200, along with cost-sharing subsidies of up to about $3,600, for a total of over $15,000. So an employer could dump your coverage, give you a raise of only $7,000, and feel like he has given you a better deal. That smaller raise could lead to much lower tax revenues than the CBO is projecting.