Affordable Care Act

construction

April’s nonfarm payroll numbers came in at 266,000, well below the 1 million people forecasters estimated would be hired that month.

The low number wasn’t because there were a lack of jobs. There were 8.1 million open positions at the end of March. And it wasn’t due to a lack of people who need work. In April, there were 18.2 million people who received some form of federal unemployment assistance.

Hire Dynamics, a staffing and professional recruitment business that operates in the Atlanta area in addition to other locations across the U.S., has experienced the shortage of workers first hand. The following Q&A is an interview with Chuck Fallaw, regional manager for Hire Dynamics.

Q: Please explain what your business does / your focus

Hire Dynamics is a regional staffing agency headquartered in Atlanta GA. We focus on temp-to-hire staffing in the manufacturing, logistics/e-commerce, warehouse distribution, administrative, and call center verticals.

Q: What was hiring like prior to the pandemic?

Prior to the pandemic, we faced challenges with finding talent due to incredibly low unemployment. For example, in Nashville, TN where we had a 1.2% unemployment rate. Their pay rates were naturally rising due to the competition for talent. However, it was still much easier to fill positions than it has been over the last year and a half.

Q: How about during the pandemic?

Hiring during the pandemic was a unique challenge. Many of our clients are considered essential, so their need for talent never slowed down. Outside of true shutdowns, we were still able to fill some roles. That changed quite a bit in the last six months.

2 (1)

What we do matters.

Best of Staffing for Client & Talent Satisfaction by ClearlyRated – 11 years in a row:
Top 1% of more than 20,000 staffing companies
Continuously recognized as a Best Place to Work company throughout the Southeast
Superior client loyalty: client ratings 8 times higher and talent ratings 2.5 times higher than the industry average
Committed to and engaged with the communities we serve

Q: Right now, are you having trouble filling positions, and if so which ones?

Yes. All of them. Many of the manufacturers we work with are running around 50% of the workforce they typically employ. Obviously, this is tough on productivity, but it also leads to environments that are not as safe, elevated worker’s comp, and general morale issues among the employees. Light industrial staffing (at least in my region) has been the hardest hit. As I mentioned before, prior to the pandemic the economy was roaring, and talent was in demand. When the pandemic hit, those needs didn’t really go away, but the talent did.

Q: In what ways are you trying to recruit / attract employees in this environment?

Grassroots recruiting is very important right now. Getting in front of the talent and helping them get back into the workforce is a big part of what we are doing. We are doing drive-through job fairs, virtual job fairs, and massive recruiting events. In addition, we are coaching our clients on reducing barriers to entry, pay adjustments, and other ways to incentivize employees to come back.

EMPLOYMENT RESOURCES

SYSTEMIC WELFARE IN GEORGIA: PART 1 THE CASE FOR REFORM

In the first paper of our three-part series presenting a vision for systemic welfare reform in Georgia, we explore the need for a welfare system that starts with the assumption that natural support systems, including individual work and a reliance on family and community assistance, should be the primary sources of help when individuals face financial need. This report demonstrates how the current system does not meet these assumptions and points to the need for reform.

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SYSTEMIC WELFARE IN GEORGIA: PART 2 PRINCIPLES AND FRAMEWORK FOR REFORM

In the second paper of our three-part series presenting a vision for systemic welfare reform in Georgia, we explore the new system as we imagine it could be, give guiding principles, provide a general framework for how the reformed system can function, and establish preliminary steps needed to implement the vision.

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SYSTEMIC WELFARE IN GEORGIA: PART 3 HOW THE NEW SYSTEM WILL WORK

In the third and final paper of our three-part series presenting a vision for systemic welfare reform in Georgia, we propose the creation of new, consolidated program modules (including their structure, design, and expected outcomes) to replace current, disjointed programs. We go on to present a structure Georgia’s governor and executive agencies could adopt to effectively and in relatively short order implement a reformed system.

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A REAL SOLUTION FOR HEALTH INSURANCE AND MEDICAL ASSISTANCE REFORM

Medical assistance programs have long needed reforms to address high prices and lack of access. Despite the fact that federal policy tends to dominate medical assistance programs, states do have some flexibility to enact reforms. This study explores how states – and particularly Georgia – have flexibility and can experiment with Medicaid, the State Children’s Health Insurance Program (SCHIP), and the Affordable Care Act (ACA) to improve access, lower costs, and streamline the system to better serve those in need of assistance.

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HIRING WELL, DOING GOOD IN GEORGIA

Georgia has suffered from higher unemployment rates and lower high school graduation rates than the national average for many years. This report takes a look at the trends driving those problems and the potential solutions, including apprenticeships, that could lead to greater economic mobility for young adults.

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healthcare politics

The federal government’s surprise move against Georgia

In a raw political move, the Centers for Medicaid & Medicare Services (CMS) removed the approval of Georgia’s Pathways to Coverage, labeling the program as “pending.”

Despite the fact that the COVID-19 vaccine rollout is consuming the resources and attention of the Governor’s office and the Department of Community Health, CMS gave Georgia only 30 days to respond before the federal government might eviscerate the program. In its February 12 letter, CMS targeted the program’s work or other community engagement components and also threatened “review” of other provisions of the program.

This move by the new administration in Washington, D.C., appears to be unprecedented. Finally secured last fall, the approval was part of an administrative process, which included time for public comments, that took years to develop.

Pathways to Coverage serves non-disabled adults below the poverty line. It is a critical component of Georgia’s plan to reduce the number of uninsured and make healthcare coverage more affordable, without sacrificing quality of care or causing other serious drawbacks associated with a traditional Medicaid expansion. It is based on the idea of not keeping these adults below the poverty line but moving them above it.

The Success Sequence provides an outline of how to reverse the cycle of poverty in our communities. GCO uses this as a framework for much of our work.

Let’s focus on helping people instead

Pathways to Coverage is really about helping people. Readers might want to check out my prior blog on this program as well as some of our published research on fixing the healthcare system.

The so-called Affordable Care Act (ACA) has caused havoc for Georgians when it comes to healthcare coverage and costs. The rate of healthcare price increases did not abate but accelerated. As we reported before, our own data analysis confirmed other research by showing that for individual markets, “Georgians suffered average price increases of 70.7% for Bronze plans, 77.3% for Silver plans, and 70.4% for Gold plans” over five years.

We also found that prior to the ACA, the median cost for a health insurance plan on the individual market for a family of four was $5,386 per year. But within six years, the cost varied from $17,550 to $26,081, depending on the level of the plan.

The bulk of Georgia’s uninsured problem lies not below the poverty line, but above it. Therefore, Pathways to Coverage necessarily links to Georgia’s Reinsurance Program designed to drive down costs in the individual markets. The test of the demonstration project will be to see how well Georgia can move people out of poverty into situations where they have better opportunities and more resources for health coverage, such as coverage through affordable individual markets or, better yet, employer-based coverage.

America has one of the world’s best and most innovative healthcare systems, if you have insurance to afford it. By far, employer-based and private insurance provides the best coverage. Medicaid has among the worst healthcare outcomes, can trap families in poverty (as we and others have demonstrated), and can be an obstacle in moving to the much-better private coverage. Incentivizing people to improve their circumstances is an important strategy that this demonstration project hopes to prove.

The Spirit of the Law

The new administration in Washington might feel like they are doing the right thing by attempting to strongarm states like Georgia into Medicaid expansion. However, this action raises concerns.

First, the question of whether the federal government can mandate states to expand Medicaid was already settled in the negative by a seven-to-two U.S. Supreme Court ruling. Second, removing a critical component of this demonstration project will not likely accomplish expansion but, if followed through, will compromise the effectiveness of the project. Third, it goes against the whole purpose of demonstration projects.

Pathways to Coverage is an approved—and hopefully remains so—Section 1115 waiver to Medicaid rules, which is found in the Social Security Act. In enacting this section of the law, Congress acknowledged that a one-size-fits-all approach dictated by the federal government is not always the best way to solve our public policy challenges.

Congress acknowledged this principle again when it enacted Section 1332 of the Affordable Care Act that allows states to come up with alternative plans in coordination with Section 1115 waivers. Georgia took advantage of both these provisions of law in developing its healthcare strategy.

Finally, demonstration projects allow states to experiment with what works best. Without experimentation, we hinder our ability to discover better ways to run public programs for the benefit of people.

What’s next

The best overall resolution would be for CMS to reinstate the approval and allow the demonstration to move forward. CMS will monitor the project, of course, but it must let it play out to see if the project will demonstrate a better way. Georgia has a vested interest in making it work. If not, Georgia could choose to modify or abandon the project. Besides, the federal government will have the opportunity to review the results when the waiver comes up for renewal.

Failure to reinstate the approval will likely result in a legal struggle before the courts. Who knows how long such a legal process will take? Instead of using our resources and time to bicker before the courts, we should apply them to seek out the best ways to improve people’s lives.

*Erik Randolph is Director of Research at the Georgia Center for Opportunity. This blog reflects his opinion and not necessarily that of the Georgia Center for Opportunity.

By Erik Randolph

Amidst the noise of the presidential election, the mainstream news media missed a major announcement the prior Sunday that promises to positively impact the lives of many Georgians.

The announcement could signal a turning point in the near future, giving hope to many Georgians suffering from the unintended consequences of the Affordable Care Act (ACA) since its implementation seven years ago.

Georgia has taken advantage of Section 1332, which is possibly the best provision in the ACA. It allows states to better design a system of providing health insurance coverage by applying to the federal government to waive burdensome requirements of the law itself and some other federal regulations.

Last year, the state legislature gave Governor Brian Kemp the authority to seek waivers from the federal government, and the governor has done just that. Without much fanfare, Georgia’s Section 1332 waiver request, as amended, was finally approved on Sunday. This approval complements Georgia’s other approved waiver request on Medicaid that received widespread press coverage and was announced during a joint press conference on October 15th with the governor and Seema Verma, administrator of the federal Centers for Medicare & Medicaid Services.

First, let’s review just some of the mess the federal law created.

The Price Sticker Shockwave

The Affordable Care Act has not lived up to its name, as demonstrated by spiking health insurance costs, especially in the individual markets.

Once the law went into effect and the new premiums took hold in the individual markets, there was a price sticker shockwave that rolled across the country. The Manhattan Institute for Policy Research calculated price increases varying from 64.5% for a 40-year-old female to a 178.8% increase for a 27-year-old male.

Our own analysis estimated premiums increased 17 times faster than the general inflation rate from 2014 to 2019. On average, Georgians suffered average price increases of 70.7% for Bronze plans, 77.3% for Silver plans, and 70.4% for Gold plans.

The chart below shows one result of our research. We estimated that the median annual price for a pre-ACA insurance plan for a family of four in Georgia was $5,386 in January 2013. For 2019, the median prices for a family of four rose to $17,550 for a bronze plan, $18,644 for a silver plan, $23,065 for a gold plan, and $26,081 for a platinum plan.

ACAHIX

Moreover, because of the unaffordability of the premiums, many who had insurance coverage prior to the ACA found themselves uninsured. As pointed out in the governor’s Section 1332 waiver application, 129,000 Georgians dropped out of the marketplace from 2016 to 2019, a staggering decline of 22%.

A major culprit for the price spikes and loss of coverage is the ACA itself. Many insurance policies in effect prior to the law became immediately ACA noncompliant because the law redefined what constituted a policy and mandated changes to how insurers calculate premiums. This was exacerbated by how the federal bureaucracy initially implemented the law. The political promise of “if you like your plan, you can keep your plan” turned out to be untrue.

The impact was not just on the individual markets. Employer-based plans also experienced major price increases, but this and other unintended consequences are a topic for another day.

Hope with Reinsurance and Better Access

The first part of the approved Georgia plan will begin in 2022, which naturally brings up the question: why must we wait so long? The short answer is because we’re dealing with government bureaucracies.

Despite the slowness, the Reinsurance Program will pass through federal funding from anticipated savings from the Premium Tax Credit, expected to be $285 million in Plan Year 2022, matched with state funds from either general revenue or a state user fee to reinsure insurers to bring down the cost of premiums. The reinsurance kicks in only for insurance claims above preset thresholds up to predetermined caps. It also varies based on three regions in the state intended to bring down more quickly the cost of premiums in those regions hurt worse from the premium increases since implementation of the ACA. The reinsurance only pays for a portion of the cost above those thresholds, up to the caps, to make sure insurers have a stake in the game to keep costs down.

Governor Kemp’s approved application estimates the Reinsurance Program will, on average, increase individual market enrollment by 0.4% and lower premiums by 10.2% in the first year, which are hopefully just conservative estimates considering the damage done to the market by the ACA. The Reinsurance Program targets individuals and families between 100% and 400% of the federal poverty level (FPL), who account for 57% of Georgia’s uninsured population.

pie chart GA's uninsured

The second part of the plan—that will begin with a delayed implementation in 2023 over concerns of the impact of COVID-19 and to ensure a smooth transition—is the Georgia Access Model addressing a major complaint about the ACA. The law makes Georgians go through the Federal Facilitated Exchange (FFE) to buy insurance on the individual markets. Government’s overreach includes requiring individuals to prove to bureaucrats that they endured a qualifying life event before they are allowed to buy health insurance during any time outside the government’s mandated enrollment period.

To be run by the state instead of the federal government, the Georgia Access Model will still allow an online exchange as before, but, importantly, it frees individuals from the mandate of going through the exchange, allowing them to shop through multiple channels, including private distribution channels, brokers, and agents. It promises to return health insurance shopping to the way functioning markets work.

Georgia is expected to run the new exchange more efficiently. Today, FFE is separate from the Georgia Gateway that handles Medicaid. Georgia will link the two together, which brings up the approved Medicaid waiver.

Helping the Poor with Pathways to Coverage

In addition to the Section 1332 waiver, the federal government also approved a Section 1115 waiver, allowing modifications to the Medicaid program. This waiver addresses adults under 100% FPL, which is 28% of the uninsured. The remaining uninsured are children under 100% FPL who already qualify for Medicaid, and families over 400% who will benefit from the lower premiums.

Here the Georgia state legislature and Governor Kemp need to be commended for not falling into the Medicaid expansion trap. What they succeeded in doing is getting the federal government to allow Georgia to transform the program into one that makes more sense.

One big problem with Medicaid is that it traps people in poverty. There are welfare cliffs and marriage penalties associated with it. Another big problem is that the health outcomes are among the worst of any health care system in the nation. The states that expanded Medicaid have subjugated more individuals to these negatives.

Instead, Pathways to Coverage establishes a demonstration project to help adults up to 100% of the federal poverty level. Private market practices will be introduced, including incentivizing healthy behavior and creating member reward accounts. The goal is to create a pathway to help persons transition to higher quality private coverage, consistent with other welfare policy goals of not having adults languish below the poverty line by helping them move out of poverty.

The Long Run

Ultimately, implementation of these approved plans will determine their success. Therefore, the state administration needs to be vigilant and continue working on improving.

Considering constraints placed on the states by the federal government, it is probably the best deal Georgia could have received. But, as officials in the Kemp administration recognize, these waivers are not the complete solution. More needs to be done.

What we would like to see is a more aggressive agenda to adopt our vision of establishing a true risk equalization system that can deliver universal coverage with the highest quality of care only possible through leveraging the free-enterprise system. Switzerland has already shown the way, and you can read more about our vision and the Swiss system here.

If you had personal experience with the FFE, escalating health insurance costs, lost your coverage, or other thoughts on the best solutions, we are interested in your story and thoughts. Be sure to post your experience in the comments below.

*Erik Randolph is Director of Research at the Georgia Center for Opportunity. This blog reflects his opinion and not necessarily that of the Georgia Center for Opportunity.

Welfare Cliffs and Gaps:

The role health insurance plays in upward mobility

By Shana Burres

Cody and Estelle are a young married couple living in a suburban neighborhood. Cody has a full-time job and Estelle is a nanny so she can have their daughter with her at work. They make just enough money to pay the rent on their small home and pay their bills, but there is rarely anything left over each month. They are not middle class but they are above the poverty line, and they are facing a potential financial crisis because of health care costs.

Cody’s work offers an insurance plan but does not subsidize the cost and the monthly premium for a family is more than their rent. Because of the expansion of Medicaid under the Affordable Care Act (ACA), they qualify for a government-subsidized plan. The coverage is poor and the deductibles are high. They are one emergency room trip or unexpected surgery away from a dire financial situation.

Cody is working on building a part-time freelance business so they can have some savings and buy a more reliable car. But he is hesitant to promote it because too much of an increase in income will push them over the ACA’s income threshold and they will lose their health care subsidy. They still wouldn’t be able to afford the employer-sponsored plan and would lose coverage entirely.

They are facing the welfare cliff, forced to choose between self-improvement and maintaining necessary services. If they increase their income, they are at risk of falling into the welfare gap—too much income for services, not enough income to cover the costs.

The implications of the loss of health care coverage reach into their and their daughter’s future. Health insurance, and the associated continuity of care, correlated directly with academic success in the short term and life success in the long term. At a basic level, health care means that students are better able to engage in their academics and miss fewer days of school.

In slightly more complex terms, lacking health insurance, along with other factors related to instability, is part of the social determinants of health. These social determinants are a cluster of lived experiences that include food instability, homelessness, and poverty. They are direct predictors of poor health and, as noted, poor health contributes to poorer academic and social outcomes. While programs or funding can often address homelessness and poverty, food instability is a reflection of the resources a family has available to purchase food. For a family like Cody and Estella’s, this may be seen as the choice between groceries and paying for an urgent care visit and a prescription for their daughter.

For them and the vast majority of people in the United State, health insurance is the barrier to care. People who live at or below the poverty line have access to medical coverage through Medicaid. And families who live far above the poverty line can access health insurance through work or afford to pay for the premiums through the health exchange. However, the evidence shows that children who are near, but not under, the poverty line have the lowest rates of health insurance. These children and their families live in the welfare gap, a reality for many living in Georgia. This means that Georgia’s families need solutions for ongoing health care to support their long-term success.

The most effective solutions are those that acknowledge the immediate needs of families and address the need for policy change. Currently, many programs are aimed at the individual or involve community-based interventions that partner health care with social service delivery systems. And these programs can be useful and effective as solutions to the immediate needs of families living in the welfare gap. Unfortunately, these health management programs do not address the upstream institutional, systemic, and public policy drivers of the distribution disparities.

Georgia’s families deserve upstream solutions that address the welfare gap and support their efforts to be participants in their health care and long-term outcomes. Three interconnected approaches offer equitable and proven access:

Untether healthcare from employers

According to the US Census Bureau, approximately 55% of people have access to health insurance coverage through their employer. This tethering of health insurance to employment leads to disruptions of coverage due to job loss or change. Therefore, untethering healthcare from its connection to employment would allow people to pursue jobs, education, or entrepreneurship free from the limitation of health insurance access or cost.

Make shopping for health insurance easier

As cost is the most significant factor influencing people’s access to health insurance, the second approach is to make shopping for health insurance the same as shopping for any other type of insurance. Individuals could compare coverage, cost, and other options across multiple providers, which would empower them to choose the product best suited to their particular needs. Currently, most people have little to no choice in which insurance product they receive from their employer and the cost is more closely related to the company’s ability to negotiate a favorable contract than it is to the types of benefits the employees need.

Offer government subsidies that do not create welfare cliffs

Of course, employers often also subsidize a portion of their company health insurance plan, and subsidies are one of the ways insurance is made more affordable for their employees. The third approach, government subsidies, would ensure these benefits are equitable and accessible to the whole population and not reliant on an employer. While government-funded health insurance already exists and subsidies are available through the ACA marketplace, the current method does not address welfare cliffs or close the welfare gap. Therefore, the policy should be updated to a means-tested eligibility system that eliminates marriage penalties and the breakpoints that contribute to the welfare cliff.

For our couple, Cody and Estelle, this new approach to health insurance would allow them to gain sufficient coverage for their whole family without spending a disproportionate amount of their income on health care costs. It would allow Cody to build his freelance business and improve their quality of life without fear of losing health insurance while their income grows.

Every person in Georgia deserves to live a healthy and fulfilling life. Access to healthcare is a necessary component of their success. These three approaches will remove barriers to access, equalize costs, and ensure support is available to those who need it.

Shana Burres is an educator, foster parent, and speaker. She holds a Master’s degree in education and, as the former executive director of DASH Kids, is a fierce advocate for equitable outcomes for children of all backgrounds and experiences. Shana currently is an adjunct professor, learning development consultant, and her local Mockingbird HUB home for foster families and their youth.

DISINCENTIVES FOR WORK AND MARRIAGE IN GEORGIA’S WELFARE SYSTEM

Based on the most recent 2015 data, this report provides an in-depth look at the welfare cliffs across the state of Georgia. A computer model was created to demonstrate how welfare programs, alone or in combination with other programs, create multiple welfare cliffs for recipients that punish work. In addition to covering a dozen programs – more than any previous model – the tool used to produce the following report allows users to see how the welfare cliff affects individuals and families with very specific characteristics, including the age and sex of the parent, number of children, age of children, income, and other variables. Welfare reform conversations often lack a complete understanding of just how means-tested programs actually inflict harm on some of the neediest within our state’s communities.

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How Second Chances Impact Communities

By Kristin Barker

We must begin to see past our biases and speak life into those who have fallen.

I recently had a mini-awakening. We were interviewing a young man who was a convicted felon. He was given a second chance to move into a job about one year ago with a company full of champions who were able to recognize his immense on-the-job potential early on. They continue to outwardly encourage him, help him as he maps out his future path, and openly show him their appreciation. The support he receives from his managers and the Human Resources team is phenomenal. But I knew this going in.

This was not the awakening. The company is Columbus Water Works in Columbus, GA. As a core company value, they believe in providing great opportunities and giving second chances. This is not because the business itself is looking to gain, although it does gain a lot, but because their corporate culture encourages this as the right thing to do. This company is a Hiring Well, Doing Good partner in part because of this important core value that we share, so this was also no surprise to me. This was not the awakening.

Watch Kevin's Story

As Kevin spoke about responsibility, he also shared his desire to influence others so they would begin see that opportunity does exist. As he continued, I saw a spark ignite in his eyes.

When he shared how he will encounter someone at a gas station and encourage him or her not to give up, it was clear that his influence on the community that surrounds him is a direct extension of the individuals who have nurtured and encouraged him since his incarceration. The responsibility he feels to share what he knows from his own experience is more valuable than any economic equation can measure. What he now knows without a shadow of a doubt is that there is hope and that he has value!

Our communities need to understand and appreciate Kevin and others like him. We must begin to see past our biases and speak life into those who have fallen. The poverty of community is just as important (if not more important) than economic poverty, and the butterfly effect I am describing is always at play either in a positive or in a negative way.

Every one of us decides daily who we will lift up and who we will allow to continue to fall. We choose every day whether we will contribute to the strength of our community by respecting and showing that respect to the weakest of our neighbors. The alternative is to fail to speak hope and to perpetuate hopelessness. As a result, this weakens our communities.

If we, collectively, determine to see the value that is inherent in others and begin to express this belief proactively and personally in an open and vulnerable way, the same spark that I saw in Kevin today will begin to catch fire in others who have no hope. Our communities will grow stronger and healing will follow.

As for me, I am thankful. I am thankful for the opportunity to meet Kevin and to hear his story. I am thankful to learn from his experience. I am also thankful to know the great leaders at Columbus Water Works who live their corporate values on the job every day. Above all, I am thankful to live in a community where potential is abundant, people generally support one another, and opportunities abound for most. My greatest hope is that tomorrow, those opportunities will abound for all!

EMPLOYMENT RESOURCES

SYSTEMIC WELFARE IN GEORGIA: PART 1 THE CASE FOR REFORM

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SYSTEMIC WELFARE IN GEORGIA: PART 2 PRINCIPLES AND FRAMEWORK FOR REFORM

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SYSTEMIC WELFARE IN GEORGIA: PART 3 HOW THE NEW SYSTEM WILL WORK

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A REAL SOLUTION FOR HEALTH INSURANCE AND MEDICAL ASSISTANCE REFORM

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HIRING WELL, DOING GOOD IN GEORGIA

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If You Accept this Raise, You Fall Off the Welfare Cliff

By Howard Baetjer, Jr

This article was originally posted on August 29, 2016 by the Foundation for Economic Education (FEE).

Getting a raise from $15 to $18 could cost you over $20,000 in net income. Would you work hard for that promotion?

Pretend you are a poor, single parent of two in Chicago, earning $12 an hour, working full time, and determined to do what is best for your family. And suppose your employer, impressed with your work, offers you training for and promotion to a new job paying $15. Should you take the offer?

It sounds like a no-brainer, but it’s not.

At your present $12 an hour you are eligible for refundable tax credits, food assistance, housing assistance, child care assistance, and medical assistance worth $41,465 combined. Together with your earned income after taxes of $22,121, you are now bringing home to your kids about $63,586 a year.

If you take your employer’s offer, you’ll earn $5,451 more after taxes, $27,572. You will also become eligible for an Affordable Care Act (ACA) premium tax credit. But at that level of earned income all your other benefits would decrease by $8,336, more than your increase in net pay. That means the income you would bring home would decrease from $63,586 to $60,701.

Now, would you take your employer’s offer? What would be best for you and your family, a move up the job ladder with a loss of $2885 in income? Or staying in your same job and keeping the larger income?

The Low-Wage Trap

This example, which is taken from a fascinating, and appalling study by the Illinois Policy Instituteentitled “Modeling Potential Income and Welfare Assistance Benefits in Illinois,” illustrates with clear charts and tables what is known as “welfare cliffs” or the “low wage trap,” which can trap families in poverty. When earning more means taking home less, the disincentive to work is obvious. The report provides striking visual representations of the “welfare cliffs” that poor people’s total incomes can fall off as they increase their earned incomes. Here is the chart on which the hypothetical above is based (the particular numbers in our example come from tables in the report, which clarify the visual data in the charts.)

Notice that welfare cliff we considered above, which occurs between $12 an hour and $15 an hour, is relatively small. A bigger one (and the reason I call the report “appalling”) occurs between $15 an hour and $18 an hour.

An Unaffordable Raise?

To pick up our thought experiment, let’s suppose that you want to get free of welfare eventually, and you know that moving up the job ladder is key to doing so, so you take your employer’s offer of a raise to $15 an hour and the corresponding loss of $2,885 in annual income. You cut back on spending where you can and look to the future. Now suppose further that you do well in your new job, you boost your knowledge and skills, and your employer offers you another promotion, with still more training and a raise to $18 an hour. Should you take it? Can you afford to take it?

At $18 an hour full time you would earn gross income of $37,440, and net income (after taxes) of $33,023. But earned income that high would reduce your refundable tax credit and ACA premium assistance, and eliminate your cash assistance, food assistance, housing assistance, and child care assistance, for a total reduction in government benefits of $26,820. So if you take the promotion and raise, your income would decrease from $60,701 to $39,332! A case could be made that it is irresponsible for you to reduce your family’s income that way.

Just think what that kind of welfare cliff does to the incentive to work (“on the books,” at least) and thereby to get off welfare. And the problem is not restricted to Chicago; the same kind of problem exists all across the country.

One of the tragedies of America today is that so many adults of sound mind and body do not support themselves and their families. It’s a tragedy not because they suffer material want; indeed, relatively few suffer so, because government assistance satisfies many of their material needs. It’s tragic because one of the keys to human happiness is earned self-respect, which requires, as Charles Murray has written, making one’s own way in the world. The vast majority of poor people don’t want welfare; they don’t want handouts; they want a good job with which they can support themselves and their families comfortably. The tragedy of the American welfare system is that it traps so many people in dependency on government, by hindering them from getting on and climbing up the job ladder, and thereby earning self-respect and happiness.

Welfare cliffs are of course not the only reason so many capable Americans languish in partial dependency on government assistance. Dreadful government schools in poor areas and systematic obstacles to getting a job, such as minimum wage laws and occupational licensing laws, are also to blame. But the perverse incentives of America’s welfare system really hurt.

Howard Baetjer Jr. is a lecturer in the department of economics at Towson University and a faculty member for seminars of the Institute for Humane Studies. He is the author of Free Our Markets: A Citizens’ Guide to Essential Economics.

DISINCENTIVES FOR WORK AND MARRIAGE IN GEORGIA’S WELFARE SYSTEM

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For high-income individuals and families, a visit to a doctor’s office is a financial non-event. They typically have robust health insurance to cover the out-of-pocket costs, and their co-pays are low and easily affordable.

But for poor and even middle-income families lacking health insurance—or trapped in plans with poor coverage and high deductibles—a simple visit to the doctor can be financially devastating.

As the recent government shutdown revealed, nearly 80% of American workers live paycheck to paycheck. Given this reality, it’s no surprise that high healthcare costs are all-too-often the straw that breaks the proverbial camel’s back and drives people facing overwhelming medical costs into bankruptcy.

The American Dream is at risk

Tragically, the inability for many to afford quality healthcare is the primary reason why fully 13.3% of Georgians lack any health insurance today. Indeed, the exponentially exploding cost of healthcare significantly discourages poor and even middle-class people from visiting the doctor—resulting in longer term, poorer, and ultimately more expensive health consequences.

The bottom line is that despite its name, the ACA has not improved the health insurance system, nor has it achieved its two primary goals—universal coverage and affordable healthcare.

Indeed, in the nine years since passage of the ACA in 2010, not only is a significant percentage of the population not insured, health insurance premiums have grown 60 percent faster than the general inflation rate—while medical care services have increased 90 percent faster and hospital services more than three times as fast.

Simply put, when 17.9% of our nation’s GDP is spent on healthcare—totaling $3.5 trillion, or $10,739 per person annually—how can people in the lower and middle income levels ever hope to move up the ladder of economic mobility and achieve the American dream?

Healthcare costs are devastating for the poor

One study from 2018 in the American Journal of Public Health showed that 7 million people who make above 150 percent of the poverty level were pushed below the poverty line due to medical expenses. And 4 million of that number fell into extreme poverty (50 percent below the poverty line). Other facts throw even more fuel on the fire:

Medical debt is a major cause of bankruptcy in the U.S.
Poor and middle class people spend a higher percentage of their income on healthcare than the rich do.
A significant story—often overshadowed by rising premiums—is the fact that health-insurance deductibles have also risen. This means that even when people need to use their high-cost health insurance plans, they still end up paying more and more out of pocket before their insurance benefits kick in.

Given this reality, it’s clear that when poor and middle-class Georgians are buried under an avalanche of medical expenses they have a much harder time pursuing the things we know increase upward mobility, including getting a better education, which leads to landing a better job with better medical insurance and a greater ability to save money, buy a house, and not be forced to live month-to-month.

Encouraging upward mobility through healthcare reform

Here at GCO, our mission is to remove barriers that keep people from thriving. In a very real sense, the overwhelming costs associated with healthcare are a burden that prevents both poor and middle class Georgians from moving upward on the economic ladder and achieving their dreams.

This is why we are calling for a comprehensive set of consumer-driven, market-based reforms to stabilize the current safety net program and achieve universal coverage for all Georgians by:

Untethering healthcare from its close association with employment so that people won’t lose their insurance because they lose or change a job.
Making shopping for health insurance just like buying any other insurance product so that consumers can identify coverage and price options—and compare apples to apples.
Providing subsidies from the government—run by the Georgia Gateway—to allow low-income individuals and families to purchase insurance on the private market. This system would be means-tested by an eligibility engine that eliminates welfare cliffs and marriage penalties.

Thanks to federal waiver applications offered through the Trump Administration that allow states to come up with their own solutions to the healthcare crisis, Georgia has a unique opportunity to enact meaningful health-insurance reform that not only addresses access to high quality insurance coverage, but also keeps families from falling down the economic ladder into poverty because of a medical crisis.

What Does an Ideal Solution to the Health Insurance Crisis Look Like?

Imagine being a worker on government assistance because your job doesn’t quite meet your bills. Then, finally, you get that raise to put you over the top and relieve some stress.

The one catch: You lose assistance needed for things like health insurance. Now, you bring home less than before.

This is called the “welfare cliff,” and it’s a situation for far too many people working to get off government assistance.

And the biggest culprit of this “welfare cliff”? Healthcare.

A practical example

Picture a single person earning the equivalent of $8.25 per hour in a full-time job with no health benefits. She would qualify for Medicaid under the Affordable Care Act’s expansion rules. But just by earning a five-cent-per-hour raise would disqualify her entirely from Medicare due to the benefit cliff.

What’s more, the welfare system is also discouraging this single mom from marrying. Only in a situation where the dad earns enough to overcome the loss in benefits would marriage be financially worthwhile.

This example shows the negative impacts of welfare cliffs in preventing people from transitioning off assistance, moving up the economic ladder, and creating better lives for themselves and their families. While well-intentioned, these welfare benefits end up trapping people in a low-income existence.

The real tragedy of welfare cliffs is that hard-working welfare recipients who are striving to get ahead find that becoming independent of public assistance is virtually impossible because of the financial hardship they will have to endure.

Georgia Welfare Cliff

Disincentives for Work and Marriage in Georgia’s Welfare System

See How Your Community Is Impacted

A practical example

Georgia Welfare Cliff

Disincentives for Work and Marriage in Georgia’s Welfare System

See How Your Community Is Impacted

What’s the solution?

We all want a welfare system that truly serves as a safety net, helping those who can’t help themselves while encouraging able-bodied adults to find work, improve their lives, and form stable marriages and families.

The Georgia Center for Opportunity has proposed welfare reforms that would:

Combine programs and reduce confusion and redundancy
Not punish welfare recipients for earning more
Encourage marriage and family formation

For healthcare specifically, our goal is to create a market-driven system that improves healthcare access for everyone by equalizing risk across the entire insured pool (as insurance is supposed to do), driving down prices while enhancing quality, having health insurance follow people rather than employers, and eliminating welfare cliffs and marriage penalties.

For those who are able to work, the ultimate question is this: Should the purpose of government-sponsored, means-tested healthcare programs, like Medicaid, be to get people back on their feet as they transition into the workforce? Or should the purpose be to provide perpetual benefits, with no end in sight?

Some in Georgia are pushing for a full expansion of Medicaid. As the Georgia Center for Opportunity (GCO) team has outlined before, this step would do more harm than good for low-income Georgia families.

But there’s another narrative unfolding that tends to not get much attention: expanding Medicaid doesn’t solve the problem of uninsured middle-class families in the Peach State. Far from it, in fact.

“Georgia lags most of the rest of the nation on health insurance”

The un-affordability problem

Proposals to expand Medicaid would extend the program to households earning 138 percent or less of the federal poverty limit ($35,535 for a family of four). As GCO scholar Erik Randolph writes in a new report (What Does an Ideal Solution to the Health Insurance Crisis Look Like?), nearly 60 percent of Georgians have incomes above that threshold.

So, what does that mean in plain language? Simply that even with tax credits available under the Affordable Care Act (ACA) that subsidize the cost of insurance, hundreds of thousands of Georgia families still consider the cost unaffordable.

The statistics on who is insured and uninsured in Georgia bear this out:

Nearly half (46 percent) of uninsured families of four have annual incomes between $35,535 and $103,000.

Woman's hands with pills and money in black and white A newly released report from the consulting firm Deloitte found that Georgia lags most of the rest of the nation on health insurance:

Georgia’s uninsured rate is 14.8 percent, compared to 10.5 percent nationally.

Around 28.5 percent of the uninsured population is below the poverty line (478,000 people) compared to 19.6 percent nationally.

Minorities are particularly impacted: 33 percent of Hispanics and 15 percent of African-Americans are uninsured, compared to 12 percent of whites.

While those near or at the poverty level are impacted by the current healthcare crisis, they’re not alone. Even the middle class can’t afford health insurance. Average prices for plans on the ACA exchanges have increased by around 70 percent since 2014. And in some Georgia counties, they’ve more than doubled.

A new system is needed

Earlier this year, Governor Brian Kemp and lawmakers in the General Assembly took the right step when they passed a bill authorizing healthcare waivers for Georgia. This is a crucial step toward full healthcare reforms that help the truly needy while lifting people out of poverty and encouraging healthy family formation. However, this is not a comprehensive solution because once families are lifted out of poverty, they still face the mounting costs of health insurance.

The answer comes in the form of a market-based, consumer-directed health insurance system. Under GCO proposals, Medicaid in our state would be fundamentally changed and consolidated with other programs so that the most underserved can access the same health insurance as everyone else. As a result, no one gets trapped in the welfare system.

These proposals also make health insurance affordable for the middle class, empower consumers to shop for the right plan, and solve the portability problem by no longer tying health insurance to employers.

In the end, everyone will benefit—poor, middle-class, and rich—under these proposals that bring common sense and sanity back into the healthcare marketplace.

A look at the correlation between health care insurance coverage and poverty in Georgia reveals some sobering facts:

41 percent of uninsured Georgians have annual incomes at or below $35,535.

Lack of insurance coverage is one of the prime reasons why life expectancy for those in poor neighborhoods is fully 10 years shorter than in the richest areas.

Premiums in the individual health insurance market have more than doubled since passage of the Affordable Care Act (ACA) in 2010.

For low-income families and those stuck at or below the poverty threshold, healthcare is one of the top expenses and plays heavily into the welfare cliff, which keeps folks mired in poverty.

Despite generous government tax credits, premiums for low-income families on the ACA health care exchanges are still unaffordable.

“The health care crisis is a poverty crisis.“

Clearly, America’s failing healthcare system disproportionately impacts the poor. And despite multiple federal and state programs aimed at creating a safety net, the poor still aren’t getting adequate health care. The bottom line is that our health care crisis is a poverty crisis.

A complicated, fragmented system

Imagine going to the doctor and not knowing whether your visit will be covered or what you should expect to pay. That’s the exact scenario that plays out for millions of low-income Americans every week. That’s partly because of rather than receiving health care coverage through one unified plan, low-income families in Georgia frequently cobble together fragmented plans.

For Georgians under the age of 18 living in a family at 138 percent of the poverty level or less, 60 percent have different coverage from their mother and 70 percent have different coverage from their father.

And depending on individual circumstances, health insurance can come through a job, individual markets, ACA exchanges, and government programs such as Medicaid, PeachCare, Medicare, TriCare, VA services, and the Indian Health Service—all with different rules for eligibility.

The time is ripe for meaningful reforms in Georgia

Instead of simply expanding Medicaid and trapping more people in the welfare system, we must explore options that help pull people out of poverty.

The solution is a consumer-directed market system coupled with a reform safety net program that achieves universal coverage for all Georgians by:

Untethering health care from its close association with employment so that people won’t lose their insurance because they lose or change a job.

Making shopping for health insurance just like buying any other insurance product so that consumers can identify coverage and price options—and compare apples to apples.
Providing subsidies from the government—run by the Georgia Gateway—to allow low-income individuals and families to purchase insurance on the private market. This system would be means-tested by an eligibility engine that eliminates welfare cliffs and marriage penalties.

A Hope For Georgians

The good news is that the President’s Administration is encouraging states to come up with their own solutions to the health care crisis through federal waiver applications. This means Georgia has a unique opportunity to enact meaningful health-insurance reform that not only addresses the health care crisis, but also helps pull families out of poverty.

Affordable Care Act

EMPLOYMENT RESOURCES

SYSTEMIC WELFARE IN GEORGIA: PART 1 THE CASE FOR REFORM

SYSTEMIC WELFARE IN GEORGIA: PART 2 PRINCIPLES AND FRAMEWORK FOR REFORM

SYSTEMIC WELFARE IN GEORGIA: PART 3 HOW THE NEW SYSTEM WILL WORK

A REAL SOLUTION FOR HEALTH INSURANCE AND MEDICAL ASSISTANCE REFORM