Photographer: Patrick T. Fallon/Bloomberg

Trump’s Health-Care Reform Uncertainty Could See Jobs Shrink

  • As many as 200,000 industry jobs could be lost: analyst
  • Goldman Sachs says replacing health law will depress jobs

Six years after the biggest overhaul of U.S. health care in half a century, the industry is bracing for more change under President-elect Donald Trump, who wants to tear it apart.

As many as 200,000 jobs may be lost in the health-care sector over the next year and employers will slow investment as they wait to see Trump’s clear plan for reform, according to Chris Rupkey, chief financial economist for Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. Goldman Sachs Group Inc. economist Alec Phillips, in a report last week, forecast “somewhat depressed” job growth in the sector, based on other tumultuous periods.

“Businesses hate uncertainty and until there is more flesh on the bones of all these proposals floating around, we think companies will take a pass on investment of any kind -- machines, headcount, real estate,” Rupkey said.

Health-care hiring has been an engine of labor market growth in the past two decades, adding more than 2 million jobs since the end of the 2007-2009 recession. On the campaign trail, Trump promised to replace Obamacare, formally known as the Affordable Care Act. 

Since being elected however, he’s suggested keeping elements of it without outlining a specific vision. This week, he picked a fierce critic of Obamacare, Georgia Representative Tom Price, as secretary of health and human services, subject to Senate confirmation.

President Barack Obama’s 2010 national health-care plan has extended insurance to about 20 million people who previously didn’t have it, winning plaudits for widening the social safety net and sending the uninsured rate to a record low. Critics of the law say it’s driving up costs for small businesses and people seeking insurance on exchanges. In October, Trump seized on news about skyrocketing premiums and deductibles for health plans offered through the ACA, saying Obamacare is “killing” corporations and individuals.

Obamacare’s affordability problem

Goldman Sachs’s Phillips said under a Trump administration he expects “something that looks more like reform of the current system rather than wholesale replacement,” with any changes not likely to take effect until 2019, partly because of the complexity of creating an alternative. Before the ACA exchanges were set up in early 2013 -- allowing people to shop around for insurance plans -- health-care hiring slowed, and a repeat is likely, he said.

“It is going to create a lot of uncertainty,” said Adam Ochstein, founder of StratEx, a human resources consulting firm in Chicago. “The whole notion of repeal and replace is going to be hard to achieve” so businesses’ confusion may persist in the near term.

While Trump campaigned against “job-killing Obamacare,” he said in a post-election interview with CBS’s “60 Minutes” that he hoped to keep coverage for people with pre-existing conditions and adult children living with parents -- two popular provisions.

“Even if Trump ultimately only tweaks Obamacare, the uncertainty leading up to that would likely cause health-care companies to be more reticent about adding to their payrolls,” said Mark Zandi, chief economist at Moody’s Analytics Inc. in West Chester, Pennsylvania. He estimates the scaling back of “just over 100,000 jobs.”

Full Employment

While the jury is still out about the overall effectiveness of Obamacare, some labor economists have cited health insurance as a factor in the ability of workers of all kinds to move from job to job, assisting American mobility.

New York Federal Reserve researchers, in an October 2015 paper, found that the ACA has helped alleviate “job lock,” a situation in which workers fear leaving their jobs because of the employer-sponsored benefits. A 2016 study by Harvard Business School professor Gareth Olds found insurance programs led to more start-ups and higher self-employment.

One of the most contentious aspects of Obamacare has been a requirement for companies employing 50 or more full-time workers to provide insurance, with some economists saying it has contributed to a shift to more part-time work. The number of part-time workers for economic reasons has been declining since the end of the recession eight years ago.

The upshot for the labor market “depends on what the Republicans put in ACA’s place,” said Jesse Rothstein, a former Labor Department chief economist now at the University of California, Berkeley.

“Without strong pre-existing condition protections, it will be a lot harder for many people to contemplate switching jobs,” he said. “Insofar as ACA has encouraged employers to shift workers from full-time to part-time -- I haven’t seen very strong evidence that that occurred -- getting rid of it will reverse that push.”

The changes are happening as the labor market is nearing full employment. U.S. employers added 178,000 jobs last month, including 28,400 in health care, and the unemployment rate fell to 4.6 percent, the lowest in nine years, according to a Labor Department report Friday.

Some businesses are taking an optimistic approach that once this period of uncertainty ends they expect to be in a position to start growing again.

Shake Smart, a 115-employee food retailer in San Diego that started in 2011, says the cost of ACA has hurt margins in a business with low profitability and curtailed its ability to add staff. In this line of work, Kevin Gelfand, president of Shake Smart, considers the costs mostly unnecessary because many of the employees are students often covered under their parents’ plan.

“Because of the ACA I am forced to offer it to staff, which crushes our small margins,” said Gelfand. Depending on the replacement, “we would hire more people,” he said.

— With assistance by Zachary Tracer

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