OBAMACARE'S EFFECT ON EMPLOYMENT: “YOU SHOULDA THOUGHT AHEAD!”

7/3/13

The Obama Administration’s decision to delay for a year penalties on employers who don’t provide health insurance to their workers exposes a near fatal flaw in Obamacare…and exacerbates one of business’s biggest immediate problems with the overall program.

As I have written on numerous occasions back when the Affordable Care Act (“Obamacare”) was being formulated, any genuine health care reform has to have three components:

1. Elimination of the ability of people to be excluded from health insurance due to preexisting conditions.
2. Forcing patients to spend more out of pocket for their health care, i.e., to make sure people have some “skin in the game” so they don’t overspend on health care.  Indeed, the major problem with our health insurance system is that the people who receive the service don’t pay for the service and, consequently, spend too much on the “what the hell, it’s not my money” theory.  The same theory is the operative approach in Washington and in every seat of government, but I digress.
3. Separation of health insurance from employment.   That employers pay for their employees’ health insurance is a ridiculous, illogical relic of World War II wage controls and must be stopped.

Whether at least two of the three above could be accomplished without some de jure or de facto government takeover of administering or paying for health care is debatable, but that is another issue. 

Obamacare succeeds in the first goal, does little or nothing for the second goal, and exacerbates the problem that the third goal is designed to eliminate or at least eradicate.  Obamacare ties health insurance even more closely to employment.   The circumstances that forced the Obama Administration to delay implementation of the requirement that employers with more than 50 employees either cover those employees or face a fine exposes this glaring weakness in the Affordable Care Act; i.e., by tying employment and health insurance even more closely, it is an enormous job killer and is especially fatal to lower wage jobs.  Paying health insurance for a six figure employee is not an inconsiderable, but also not an impossibly onerous, burden.  Paying for health insurance for employees who make $10 or $12 an hour adds so much to the cost of employing them that it makes no sense to hire them.   This piece of common sense seems to elude most people in the Obama Administration and, to be fair, in most of Washington.

So the Obama Administration seems to have sobered up and delayed implementation of this component of Obamacare so the wonks can work out the kinks and employers can better prepare for its onslaught.  This preparation on the part of employers may amount to deciding which employees to let go or cut back; let’s hope that the Obama people are starting to figure this out.

But this delay may make things worse in the short run.  One of the problems with Obamacare is that it adds to the lack of clarity (I don’t like the term “uncertainty,” as my regular readers know; life consists of uncertainty and anyone who wishes for certainty will die frustrated, but I digress.) that businesses face when they make decisions.   Now that businesses have to wait another year for this aspect of the law to kick in, and to wonder whether it will kick in, they are faced with more questions…and less incentive to hire more people.

Since most people in Washington, in both parties, have never actually made a living that didn’t involve, er, suckling at the government mammary gland, such simple concepts doubtless escape them.  While such lack of acquaintance with the real world on the part of our public servants is a recurring theme of this blog, it nevertheless merits frequent repetition.