September 19, 2013

Obamacare – It Has Not turned Out as Planned

by Hal Gershowitz

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It is axiomatic that people and employers will act in their economic self‑interest, and that is absolutely true of one of the major costs in today’s economy–healthcare costs.

In 2010, shortly after President Obama’s election to his first term, the so‑called Affordable Care Act was passed without a single Republican vote and thus began a saga of whether or not this Act would reduce healthcare costs and make affordable coverage available to most Americans.

That question has been answered.  There are many employers not joining the Obamacare law, but in fact, those who were expected to join have elected not to do so.  As the Washington Post reports:  “As more about the law is learned, more problems come to light.  Two groups crucial to the healthcare law’s success, employers and young adults, are beginning to see that the costs may be outweighing the benefits.”  Participation by employers is critical to making the law work.  The law counts on employers to continue offering coverage.

What is happening, however, is that since the costs of the employer mandate are learned, many employers have cut back on the hours that their employees work to under 30 per week, because as part timers the law does not require coverage.  Therefore, the very people who were supposed to benefit now have to live with part‑time employment.  The cost‑benefit obviously is not working.  Full‑time would clearly exceed the benefits that the healthcare law would confer.  Young adults who are generally less costly to cover are also expected to play a key role in the law’s success by keeping costs down.  Reportedly, the Administration estimates that of the 7 million enrollees they expect in the Exchange next year, 2.7 million need to be young healthy adults to make the premiums work.  In fact, however, as we just said, those young adults are beginning to see the reality of the healthcare law and understand how they wind up losing from every angle.

The costly benefit mandates, plus paying artificially higher premiums solely because of their age, will make their coverage costs higher than the penalty for not purchasing government approved coverage.  Thus, many young adults will simply pay a lower price penalty instead.  And finally, whether they try to pay for coverage or opt for the penalty, some will likely find part time jobs where full time employment used to be.

Although the healthcare law applies to everyone in the private sector, isn’t it surprising that Congress in covering its staffers, has decided not to buy healthcare coverage under the Obamacare law.  This is kind of a what’s good for thee is not good for me.

The interesting thing is that although the President had no legal position to do so, last year in 2012 he delayed the acts coverage until 2013.  Why then does he consider the Republican effort to defund Obamacare so evil?

“While the Administration has handed out waiver after waiver and exemption after exemption for the well‑connected in Washington, they have done nothing to lower health care costs for families in Michigan,” said Dave Camp, Chairman of the tax‑writing House Ways and Means Committee.

Camp said the OPM ruling is the “latest proof” of impending failure for the reforms and pledged that Republicans would keep trying to repeal them.  Even House Democratic leader Nancy Pelosi said the language problem would have caused unintended “collateral damage” on Congressional staff, causing many to leave for the private sector.

This is part of the reason that the American people are so disgusted with Congress and probably having learned the true ramifications of Obamacare, the entire government itself. 

The Wall Street Journal editors have revisited the maneuverings of Congress and the Obama Administration to work around a rule that required our fine Representatives and Senators and their staffs to be subject to Obamacare rules.  It is worse than they thought.  The White House having released the legal details behind the Obamacare bailout for Members of Congress and their staffs, and if anything the rescue is worse than the leaks which suggested:  dispensation for the ruling class, different rules for the hoi polloi.

Don’t expect that the law will be repealed because even if the House and Senate either defunded or repealed Obamacare, the President would clearly veto that legislation and there would not be sufficient support to override his veto.  Don’t you love the sound of the political class scratching each other’s backs?

The charitable term for such legal gymnastics is creative.  When statutes conflict, such as the Full Employment Act, the bedrock administrative law obligation is to enforce the most recent statute, which is, of course, the Affordable Care Act (Obamacare).  “Notwithstanding” clauses are routine catchalls that are supposed to emphasize Congress’s intent that a new bill is controlling and pre‑empts other laws on the books.

The White House is claiming the clause means the opposite, as if the 2010 law and the 1959 Full Employment Act have nothing to do with each other.  That is not how it is supposed to work.  When Congress kicked itself out of the traditional Full Employment Act, it kicked itself out of Obamacare, the most sweeping healthcare program created in a half century, is expected to extend coverage to 25 million Americans over the next decade, according to government estimates.  But that will still leave out a projected 31 million people without insurance by 2023.  Those left out include undocumented workers and poor people living in 21 states, such as Virginia, that have so far declined to expand Medicaid under Obamacare.

“The law will cut the number of the uninsured in half,” said Matthew Buettgens of the Urban Institute.  He said, “This is an important development, but it certainly isn’t the definition of universal.”

If all states expand Medicaid, Obamacare still leaves millions uncovered.  Mr. Buettgens wrote an excellent paper on this for the Urban Institute before the Supreme Court decision which upheld the law.  He estimates that more than half of those without health insurance would fall into two categories:  Undocumented immigrants who are ineligible for the insurance expansion, and people who are eligible for Medicaid but not enrolled.  “Even in states that have done a good job with outreach, they are way below 100 percent, maybe around 60 percent.

So even with the increased outreach under the Affordable Care Act, it is estimated that take up rates are in the range of 70 to 75 percent.”  Thus, even with Obamacare, Mr. Buettgens’ work estimates that some will have an affordability exemption and will not be able to find a health insurance plan that costs less than 8 percent of their income, which means they won’t have to pay a penalty for not carrying insurance coverage.  Others will find affordable coverage, but simply decide not to buy it.  Isn’t this exactly the consequence that Obamacare was passed to avoid happening?

Thus, as we said above, if you work for a company that doesn’t currently provide health insurance to its full‑time workers and you work up to 30 hours per week, you are at the highest risk of having a negative effect from the health care law.  Although the law’s “mandate” is meant to help provide this insurance, it has backfired with some of America’s largest employers and ironically many government institutions.  While only a small portion of the companies affected have responded by cutting hours, the Americans who are affected is staggeringly high.  If you have been affected by the Obamacare “employer mandate,” we would like to know who you are.

On top of all of this, Obamacare small business Medicare tax hike is a 0.9 percent increase on the current Medicare part A tax.  Small businesses making under $250,000 dollars in taxable profit, don’t have to pay this tax.  The group of small businesses making over $250,000 in taxable income accounts for 3 percent of small businesses in America.  It is reported that if all states expand Medicaid, Obamacare still leaves million uncovered.  Thus, as we said previously, provisions of the Obamacare law don’t work, and the law has had an effect contrary to the hopes of those who passed it in the first place.

As we said at the outset of this essay, it is axiomatic that people and employers will act in their economic self‑interest, and that self‑interest certainly is not to have insurance coverage under the flawed provisions of Obamacare.

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