One of the inevitable realities of Obamacare, is that in most cases, it is cheaper for an employer to drop coverage, and dump their employees onto the Obamacare exchanges. This is by design. As Zeke Emanuel–brother of Rahm and architect of the ACA explained–by 2020 90% of Americans will be “shifted” onto Obamacare. Justice Alito’s opinion addressed this issue, in a round-about way in Hobby Lobby, with a subtle dig at how hard it is to sign up, presumably on HealthCare.gov.
Although these totals are high, amici supporting HHS have suggested that the $2,000 per-employee penalty is actually less than the average cost of providing health insurance, see Brief for Religious Organizations 22, and therefore, they claim, the companies could readily elimi- nate any substantial burden by forcing their employees to obtain insurance in the government exchanges.
Even if we were to reach this argument, we would find it unpersuasive. As an initial matter, it entirely ignores the fact that the Hahns and Greens and their companies have religious reasons for providing health-insurance coverage for their employees. Before the advent of ACA, they were not legally compelled to provide insurance, but they never- the less did so—in part, no doubt, for conventional business reasons, but also in part because their religious beliefs govern their relations with their employees. See App. to Pet. for Cert. in No. 13–356, p. 11g; App. in No. 13–354, at 139.
Putting aside the religious dimension of the decision to provide insurance, moreover, it is far from clear that the net cost to the companies of providing insurance is more than the cost of dropping their insurance plans and paying the ACA penalty. Health insurance is a benefit that em- ployees value. If the companies simply eliminated that benefit and forced employees to purchase their own insur- ance on the exchanges, without offering additional com- pensation, it is predictable that the companies would face a competitive disadvantage in retaining and attracting skilled workers. See App. in No. 13–354, at 153. The companies could attempt to make up for the elimi- nation of a group health plan by increasing wages, but this would be costly. Group health insurance is generally less expensive than comparable individual coverage, so the amount of the salary increase needed to fully compensate for the termination of insurance coverage may well exceed the cost to the companies of providing the insurance. In addition, any salary increase would have to take into account the fact that employees must pay income taxes on wages but not on the value of employer-provided health insurance. 26 U. S. C. §106(a). Likewise, employers can deduct the cost of providing health insurance, see §162(a)(1), but apparently cannot deduct the amount of the penalty that they must pay if insurance is not pro- vided; that difference also must be taken into account. Given these economic incentives, it is far from clear that it would be financially advantageous for an employer to drop coverage and pay the penalty.