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The Law of Unintended Consequences

Counter-CutNancy Pelosi quipped as she campaigned for passage of Obamacare, “But we have to pass the bill so you can find out what is in it, away from the fog of controversy”.  Well, they passed the law and now we’re finding out what’s in it.  Here are some late developments:

Obamacare is entitled the “Patient Protection and Affordable Health Care Act.”  It accomplishes neither objective.  These are the effects of Obamacare’s unintended consequences:

  • Smaller paychecks due to reduced working hours
  • Fewer jobs available due to lower hiring
  • Higher medical insurance cost, hence less disposable family income
  • Increased welfare rolls due to fewer jobs and lower pay
  • Larger government deficit due to increased welfare rolls
  • Continued economic depression because of unmanageable government deficit and overspending
  • Loss of freedom due to bureaucratic government intrusion on our personal lives.

The list above represents a national death spiral.  If you’re concerned about your future and your children’s future, sign on to repeal Obamacare before it destroys you.

More details follow:

Obamacare’s Insurance Pools for ‘High-Risk’ Patients Running out of Money

Obamacare was supposed provide insurance for the uninsured and uninsurable through the establishment of insurance pools for high-risk patients, much like states have done for high-risk drivers.  The problem is that the authors ignored economic reality and significantly underpriced the cost of operating the pools in order to appease concerns about negative budget impacts; otherwise Obamacare would have never passed.

In reality there is no such thing as free insurance; thus budgeted funds have already run out.  Consequently the program has decided not to accept any new applicants in order that service to existing members in the pool can be continued.

Hence high-risk patients not yet in the pools will be unable to get insurance  in March 2013. This is the beginning health care rationing by bureaucrats, plain and simple.

Obamacare increasing health care insurance cost

Obamacare is entitled the Patient Protection and Affordable Health Care Act.  It is just the opposite.  It neither protects patients, nor will it be affordable.    For example, the IRS calculates the Cheapest Obamacare plan will cost $20,000 per family.  The average family healthcare plan today costs a little less than $16,000 or 20% less than the minimum required by Obamacare.  Don’t be fooled.  Payment will be made; it’s a just a matter of how, when, and how much is wasted on bureaucratic administrative overhead.

Obamacare Imposes Marriage Tax

An article entitled, “Obamacare grants exemptions for everyone but taxpayers” states:

The result will be astounding: “Family” units with a mom and dad may never marry, because if they remain separated, they will qualify for more federal assistance than the traditional nuclear family. Effectively, Obamacare imposes a marriage tax.

“After the regulations issued in the last month, the plan appears to be a penalty against marriage and a message to many employers to not bother even offering healthcare to spouses. And it still leaves 460,000 kids uninsured.”

Our country is already in a moral free-fall because the family is disintegrating.

  • 41% of children are born out of wedlock.
  • Out of wedlock birthrate has is 2.2 times as high as it was 30 years ago.
  • A child is 51% more likely to live in a single parent household today than 30 years ago.

Source:  U.S. Census Bureau

The disastrous impact of growing up in single family households is well documented, and Obamacare will just accelerate the destruction of our families, and ultimately the collapse of our society.

Employers are cutting hours and not hiring employees because of Obamacare

Obamacare was supposed to provide universal health insurance, but employers are not buying.  Instead, many employers are simply choosing to reduce employee hours to below the 30 hour threshold for full-time employment.  Thus, not only will low-wage employees lose any health-care benefits they may have had prior to Obamacare, but they will also bring home a smaller paycheck.

To make things worse, many companies are postponing hiring to in anticipation of uncontrollable Obamacare cost.  Hence many individuals will be unable to find a job.  The end result is:  More people will require government assistance, driving up a deficit already out of control.  We have already seen this effect played out with extended unemployment benefits and the explosion of Social Security disability payments during the past several years of economic difficulty.

Obamacare will exacerbate an already critical situation.There is no free medical insurance.  Someone has to pay.  If it’s not the employer, then it’s the citizens – paying personally or through taxes levied by the government.  Either way, we the citizens pay.  The problem is that the price of health insurance per person will skyrocket because of regulatory requirements levied on insurance companies by Obamacare.  So Citizens will be caught in a double bind:  Less income and higher legislated expenses from the increased cost of Obamacare, leading to less disposable income.  Less disposable income always leads to a lower standard of living.

Some examples of Obamacare’s impact on working hours follow:

Large Companies Considering dropping health insurance for their employees

Obamacare requires large companies to offer health insurance for their employees (but not their families).  Therefore large companies have no incentive to offer family health insurance, just individual employee health insurance.  In fact, large companies don’t even have much of an incentive to offer any health insurance at all because it would be much cheaper for them to simply pay the “penalty” than to offer health insurance.  For example,

2012 average annual health care premiums for a single person were $5,615, while comparable coverage for family was $15,745.  Compare these figures with a fine of only $2,000 for not providing health care insurance.

A large company can save $3,615 for single person coverage (a 44% savings), or $13,745 for family coverage (an 87% savings).  Considering that the average per capita income in the U.S. is only $41,560, these savings represent significant potential cost reductions – savings of up to as much as 24% of an employer’s per employee expense!

Now, if one considers that most businesses operate on margins of only a few percent and that labor accounts for a significant portion of operating expenses, an employer could quickly achieve a reduction in employment-related cost of 10% or more simply by opting for the penalty instead of the insurance!

Therefore we will see a cascading effect of large companies abandoning health care insurance for their employees industry by industry.  First just one, but then all competitors must follow suit to remain cost-competitive.  Ultimately we’ll see an avalanche.  It is inevitable:  Any competitors who choose to maintain a higher cost structure by providing health insurance will be unable to compete with their lower cost competitors on price and will lose market share.  Thus they, too, will be forced to drop health insurance just to survive.

So expect to see a wave of large companies discontinuing their employee health insurance coverage programs in the next decade or so – driving ever more people into the ranks of the uninsured.  The movement has already started:

IRS will expand staffing to support Obamacare

Some claim the IRS will hire thousands of new agents to enforce Obamacare.  The IRS claims its new hires will be used for our benefit:  Specifically, to “ensure accurate delivery of tax credits.”

Is the IRS really worried about people who don’t take advantage of their tax credits?  Is the IRS serious?  Does any businessman leave money on the table for the IRS to scoop up?  Don’t most businessmen come up with all kinds of schemes just to avoid paying more money the IRS?

Now think about the illogic of the IRS’s statement:  The IRS needs more people to process tax credits that didn’t exist before because the taxes to which they apply didn’t exist before?  The IRS must first levy and collect a tax before it can graciously offer a tax credit – not the other way around!

Lastly, is the function of the IRS to collect money or to dispense money?  If you believe that its function is to dispense money, I have some swamp land…

But the most frightening possibility of all is that these additional IRS staff will be applied to selectively “enforce” a law which is so complex, comprehensive, and vague that “we had to pass it to find out what’s in it.”   What guarantees do we have that it won’t be twisted, perverted, and used to persecute the political enemies of those in power?  Perhaps such as scenario sounds farfetched and paranoid, but tax law has been used to harass and prosecute individuals, and recently there have been rumors of such activities.  Do we value our freedom so little?

Exploding bureaucracy and wasteful growth

Obamacare has resulted thousands and thousands of pages of regulations, new administrative bureaus, new public relations programs, new data collection and management centers for sensitive personal information, and new enforcement tools.  Every one of those functions represents a significant overhead expense which does not heal one single sickness, eliminate one single disease, or provide for one single prescription or doctor’s appointment.  These overhead functions make no one healthier or happier; they simply add to overall healthcare system overhead and create an unnecessary financial burden on an already stressed healthcare system.

Even more importantly, the primary function of every government bureaucracy is not to improve citizens’ lives but to propagate and grow itself.  Not a single government agency has ever worked itself out of a job; each only grows.  Not a single government agency has ever eliminated unnecessary rules and regulations on its own; each only adds more.  Obamacare is no different and will predictably result in a wasteful house of bureaucratic horrors eating us up.

A tax by any other name…

Don’t be confused by the law.  There are two separate issues:  Eligibility and Tax Liability.[1]  These issues are handled differently, as the following will attempt to clarify.

Eligibility

Obamacare includes a 50 employee cutoff between “small” businesses and “large” businesses for eligibility purposes.  Large businesses are required to provide health insurance to their employees (not dependents, however) or pay a fine.  Small businesses are exempted.  The incentives are clear:

  1. Stay under the 50 employee cutoff to avoid a fine
  2. Don’t provide insurance for dependents.

The 50 employee eligibility cutoff (“small” vs. “large” company) is measured in “full-time employee” headcount.  Therefore a company with 51 full-time employees is considered a “large” company, while a company with 51 part-time employees – and not full-time employees – is considered a “small” company.  A full-time employee is one who works 30 hours per week or more; all other employees are part time.  Simple enough.

Based on this formula, it makes more sense for a company to hire part-timers and forgo the mandated health care insurance required for full-timers.  As discussed above, this is a reasonable business strategy many businesses are choosing to follow today.

Tax Liability

But Obamacare also changes the tax code in a manner that affects all businesses – small and large.  All businesses calculate their tax liability based on their profits, which are calculated by deducting all expenses from revenues.

Health care premiums paid by the business are a legitimately deductible business expense in their entirety for calculating profit, but the law limits how much of this expense can be deducted by small businesses when they choose to offer their employees health care insurance.  Specifically, the law shifts from a headcount calculation to a “full-time equivalent (FTE)[2]” calculation to limit how much of the health care premium small businesses can deduct:  A small business will be able to apply only 50% of its health insurance premiums against its taxes as a tax credit (direct tax reduction) up to a maximum amount determined by a calculation based on its full-time equivalent (FTE) number.

Furthermore, a small business wanting to offer health insurance will be required to provide a minimum level of insurance as specified in the law.  But that minimum level includes new requirements that raise per employee cost, potentially making it more economical for the company to forgo offering any health insurance whatsoever.  Thus the law provides strong disincentives for small companies to offer employees any health insurance at all!  Once again, Obamacare drive employees into the ranks of the uninsured!  Instead of living up to its name, the Patient Protection and Affordable Health Care Act will accomplish just the opposite of its intended effect!

All is not as it looks

(951)


[1] Go to http://www.gpo.gov/fdsys/pkg/BILLS-111hr3590enr/pdf/BILLS-111hr3590enr.pdf to view the officially enacted law.
A search for “50” provides results only in the following  places in reference to employees, all related to small employer definition:

  • P. 54, Section1304 (Related Definitions)
  • P. 136, Sec 4980H (SHARED RESPONSIBILITY FOR EMPLOYERS REGARDING HEALTH COVERAGE.)
  • P. 793, Sec 10106 (Amendments to Subtitle F)

A similar search for “equivalent” comes up with the following result, specifically related to tax calculation:

  • P. 120, Section 1421 (SMALL BUSINESS TAX CREDIT)

[2] Full-time equivalent (FTE) is calculated as follows:  The total number of hours all employees actually worked divided the total number of hours all those employees could have worked had they all worked full time.  Two examples follow, assuming a normal 40 hour workweek for a full time employee:

  • A company that hired 20 people at 20 hours per week (half-time) has 10 FTE (20 times ½).
  • A company that hired 4 people at 30 hours per week (¾ time) has 3 FTE (4 times ¾).

Note that Obamacare may use 30 hours as a normal workweek for this calculation.  It’s unclear at this time.

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