Obamacare Meets Reality. Reality Wins. | RedState
Obamacare Meets Reality. Reality Wins.
Another Adventure In Cargo Cult Economics
By: streiff (Diary) | November 24th, 2012 at 06:01 PM | 85
RESIZE: AAA
For years the Democrat party has derided the GOP’s view of economics. Our view, essentially, is that your money is yours, not the government’s, and the decisions you make on how to spend it will inevitably be more lucid than anything the government comes up with. The corollary to this is that income redistribution is nothing more or less than theft which characterizes garden variety covetousness as fairness. They call this “trickle down” economics.
The Democrats have their own operating principle: Cargo cult economics. It has many facets but the basis idea is that if the government creates something that is associated with a vibrant middle class then a vibrant middle class will spring from that program as inevitably as Athena sprang from the forehead of Zeus.
Though the term has been around for a while, I first encountered it while riding with a good friend through a dystopic steel town outside Pittsburgh where right in the middle of boarded up store fronts some governmental agency had plopped down an “arts center.” The idea being that somehow funding an arts center in a mostly deserted downtown would revive the downtown area because affluent downtowns all have arts centers.
Over the past months, we’ve chronicled the Obama regime’s slavish devotion to cargo cult economics (here | here | here | here | here | here). Now the slow motion implementation of Obamacare is giving us a rich laboratory for observing cargo cult economics in full flower.
What Obamacare has done is create a series of perverse incentives that encourage businesses to stop providing health insurance. As a business you have the choice of providing a rather gaudy health care plan to your employees or paying a tax. I say gaudy because the the basic requirements of the package, providing enough birth control pills to satisfy Sandra Fluke’s appetites, for instance, adds cost on to the plan. Contrary to what a lot of people seem to believe the health care plan provided by your employer is not YOUR health plan, it is your employer’s.
So by paying a tax, a business can avoid the human resources head ache of managing a health plan and reduce costs. What option do you think many businesses will choose.
But wait there is more.
An employer only has to provide a health plan for full time employees. There is no penalty for not providing health coverage to part-time workers. And there are no penalties if you employ fewer than 50 persons (by person I mean full-time equivalents: if you have part time workers and your average number of hours worked exceed 50 x 120 (4 weeks x 30hr/week). You can read more on the nuances of calculating what is a full time equivalent worker courtesy of RedState member jayp.
Faced with the prospect of paying as much as $40,000/year some employers are reducing both full time positions and total number of employees.
Companies as diverse as Papa John’s, St Jude’s Hospital, and Murray Energy have all announced layoffs that are linked to Obamacare.
What Obamacare has done in the name of providing universal health care is to make it advantageous to employers to provide no health care whatsoever. This isn’t necessarily bad, in my view one of the major shortfalls of our current system is that the policy is owned by the employer rather than the employee, but what is bad is when such a sea change occurs when the actual operational concept was to expand the scope of coverage provided by employers.
By gold plating the minimum policy, employers are encouraged to carry no policy at all. To avoid the fines associated with not providing coverage employers have an incentive to reduce a vast majority of employees to working less than 30 hours per week. If you are a waiter, your employer now has an incentive to reduce your tip income to avoid health care costs:
Bob McAdam, Spokesperson for Darden, parent company of Olive Garden and Red Lobster restaurants, stated that they were still in a test stage back in October. The company had made plans to reduce hours and require tip-sharing from waitstaff to the remainder of employees, which would eliminate the owners from having to provide tip-credit*. (*A set hourly pay amount for waitstaff established by the local government and is divided into two parts. If the waiter doesn’t earn tips then they receive the whole amount of both parts. If the waiter does receive tips then they only receive half of the hourly amount.)
On the subject of employers wanting to reduce the incomes of waitstaff for his own benefit, it certainly isn’t going to encourage staff members to purchase food at his restaurant.
One issue that concerns career waiters is that they choose the field because they can earn up to $200 per day in tips, having to share their income with remaining employees reduces their own income.
When is a waiter responsible for paying for the wages of his co-workers? For that matter why is the paying consumer responsible for paying for the wages of a business above and beyond the price of his meal? The tip has always been a gratuity, a thank you, an appreciation, not meant as a subsidy for business owners to underpay their employees.
Since the government assumes that the waiter is earning at least 8 percent in tips figured on his gross sales for the day; reporting less could trigger audits.
In the view of Obama and his minions companies are in business to provide free stuff to their employees (so his view on economics parallels his view on governance) and since a vibrant middle class has health care provided by their employer if the government merely mandated this to happen we would suddenly be prosperous.
Now the demographic Obamacare sought to help is finding itself not only without health coverage, it is also required to work two jobs to make ends meet. Well played, President Obama.
85 comments • 383 reactions
Discussion
Community
DerKrieger • a day ago
I just hope that employers that take these actions to avoid Obamacare let their employees, especially the ones that voted for Obama, know why the changes are happening.
Of course the business owners will be denounced as greedy and uncaring; it's already happening. I recommend business owners post signs stating "You have been hired and are working here because we have need of your services. We did not hire you to provide you with a job. Employment is a mutually beneficial exchange; we get your labor and you get a salary. If this arrangement is for any reason unsatisfactory, you are free to leave at any time."
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gscandlen DerKrieger • 21 hours ago
The really fun thing about ObamaCare is that it will result in FEWER, not more, people with health insurance. Yes, employers will drop coverage in droves and then people will be forced into clunky incompetent Exchanges. But the Exchange will have to enroll them at any time for any reason, so they will wait until they really need services to enroll. After that, they will drop out again. The tax penalty for non-enrollment is small and will apply to almost nobody. Ditto with the Medicaid expansion. One-third of the uninsured are already eligible for Medicaid but don't feel a need to sign up.
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streiff Mod gscandlen • 21 hours ago
the real fun fact is that without near universal employer support, either through providing coverage or paying penalties, the costs on this will absolutely skyrocket as most people are forced into an exchange. This is going to increase out of pocket expenses of those individuals least able to afford them.
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dpmaine streiff • 20 hours ago
If nothing changes, those people will be subsidized and the formula covers a maximum out of pocket that is based on your income.
The problem for conservatives is that a lot of people are going to be getting big transfer payments to pay for private health insurance. It's going to be a bonaza for insurers and the taker class.
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jpkoch dpmaine • 15 hours ago
I agree that in the short run it will be a bonanza. But, in the long run there will be not enough revenue coming in. And many people are assuming that the GDP will remain in positive territory. If we go into recession all bets are off.
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clowngirl dpmaine • 7 hours ago
Does anyone know the details of the formula? I would imagine the definition of "afford" will become something like " if you're willing to forgo saving money and/ or any discretionary spending" or "if you can still pay all your bills plus Obamacare and not be then totally strapped with the help of one or more credit cards"
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dpmaine gscandlen • 20 hours ago
Yup - adverse selection bias, here we come.
One of the little dirty assumptions is that the "teaser" penalities in the current law will have to be increased to make them hurt enough to keep people insured. And then they'll need a system to notify the IRS when you drop coverage, so they can force you to re-enroll. Some states have systems like that with auto insurance, like if you drop your required insurance your registration gets automatically pulled within 5 days or something. It's disaster to go through if they ever make a mistake, you can very easily end up in jail.
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jerseygalnny DerKrieger • a day ago
Well said, it seems we are in agreement. Also in the minority for now.... God bless!
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justincredible DerKrieger • a day ago
My company doesn't offer any health care benefits. I don't think Obamacare is going to change anything. At least maybe I'll be able to afford some kind of coverage.
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Ann_W justincredible • a day ago
Why would you be able to more now? The small steps that have already been taken to implement Obamacare has already shot the price of healthcare up dramatically.
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skorrent1 justincredible • 17 hours ago
You will not be offered "some kind of coverage". You will be obliged to carry a gold-plated policy, and some bureaucrat will decide if you can "afford" it, or if the taxpayers will pick up part of the tab.
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clowngirl skorrent1 • 15 hours ago
Great point skorrent1! There is undeniably a market for relatively inexpensive, high deductible "catastrophic" coverage- for people who are basically healthy, fine with paying out of pocket for the medical care they are likely to need, and don't want to waste a lot of extra money on health "insurance"- such a thing was unavailable in many states even before Obamacare- now it will be abolished altogether.
It's worth remembering that the individual mandate was always the least popular aspect of Obamacare--- even among people who like the idea of Obamacare in general-- presumably that subgroup has taken comfort in the idea that all employers will now be forced to provide healthcare... It will be interesting to see how things play out when that segment is disillusioned with (as Streiff explains) consequences so different from what they imagined.
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searcher0 DerKrieger • 19 hours ago
deny's has added an obamacare surcharge to the bill.
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CarolT searcher0 • 10 hours ago
I hope it says Obamacare surcharge on the bill, and it's not hidden in the costs.
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brah • a day ago
This was always the plan. Have businesses move people from private to government insurance and expand Medicaid, a backdoor to universal healthcare. Those that keep private health insurance will be deemed to have Cadillac plans which will be taxed into non-existence. The Independent Advisory Board will cut physician reimbursements and soon we will be admiring Michael Moore's Cuban healthcare system.
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streiff Mod brah • a day ago
do me a favor. Read the whole story.
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brah streiff • a day ago
Those that are dropped by their employers will be swept up in a massive expansion of Medicaid. Their plan all along clearly was to make employers drop their healthcare coverage. They will then control healthcare decisions through physician reimbursement cuts with the IPAB. It is the backdoor to Hillarycare.
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streiff Mod brah • a day ago
do me a favor read the whole story
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brah streiff • a day ago
you are naive if you don't think that employers dropping healthcare coverage was Obama's plan all along. Yes, from his perspective, it was "well played".
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streiff Mod brah • a day ago
stop your spam commenting. You are attempting a threadjack and it isn't going to turn out well for you.
You obviously aren't interested in discussing this story. Either post your own diary or move on. Or I move you on.
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brah streiff • a day ago
I've been here since nearly the beginning of this site and this is all you ever have. I agree with your story with the exception that Obama's plan always was to get employer's to drop healthcare coverage. If that is threadjacking and you want to move me along, so long.
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streiff Mod brah • a day ago
just to reiterate, I think your strawman was very cute and he burned very bright. But that is not what I wrote about and it pisses me off to no end that you not only don't have the common freakin courtesy to comment on the story... or equally satisfying to me would be to ignore it... but you contrive some "exception" which I don't even address.
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garfieldjl streiff • a day ago
streiff, brah's argument may not be a strawman, there may actually be something there.
When you consider all these items in place to make sure that part-timers are counted, the regulatory mess, coupled with the initial push for government run healthcare, etc. I honestly do have a similar suspicion that it may be deliberate, I don't think there is enough out there yet to say that it was deliberate with certainty, but there is enough there that one must acknowledge the fact there may be something to that allegation.
I know you guys are worried about being painted as nutty by the left wing media, but I honestly think there comes a point when the assumption of this mess being the result of just plain incompetitence starts starts to look rather implausible.
Fact of the matter is that there have been others that have voiced a suspicion that it is deliberate, including Rush Limbaugh, I think Mark Levin may also have similar suspicions.
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streiff Mod garfieldjl • a day ago
I am not arguing with his argument. I actually agree with it. But the story is NOT about what the regime intended to happen. It is about something entirely different;
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SoFiMil streiff • 21 hours ago
I actually don't agree. But that, as they say, is a diary for another day. As to the diary - most definitely another example of foreseen but unintended consequences.
We told ya' so!
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garfieldjl streiff • a day ago
Fair enough.
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americanmale streiff • a day ago
Of course Brah is right. Having said that though...you said,
"So by paying a tax, a business can avoid the human resources head ache of managing a health plan and reduce costs. What option do you think many businesses will choose."
Actually, since the tax is a penalty, many businesses will try to comply. The reason being that a penalty ups the chances for audit...particularly if businesses opt to pay penalties on "many" employees.
Audits are expensive...They involve accountants, ungodly manhours servicing audit requests, nerves, and of course, most always leads to other things....like penalties for taking deferred income when the IRS doesn't believe it should be deferred, or taking charges on special items that the irs might not find so special.
And no, businesses can't lay off workers, or reduce hours for that manner. All that has already occured in 2008/2009. There is no more "fat" to trim.
We still need to be in business....and get things done. Every non fortune 1000 private enterprise employee working today has a value that can't easily be replaced.
Healthcare is nothing compared to the training costs of new skilled employees. It really takes a year or so just to get newbies (part time or full time) going at full productivity. This law has us in a 20 percent upcharge bind.
No, what we'll do instead is raise prices (inflate), We'll try to comply because we don't want the idiot government to get involved in our private enterprise, and of course, when we can't afford the mandates, we'll lay people off....and become stagnant and marginally maintainable.....and basically just not give a crap anymore.
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streiff Mod americanmale • 21 hours ago
You are simply wrong. Your assertion does not override the evidence. The links provided identify dozens of companies that have elected to reduce their work force or convert a substantial number of full time employees to part time status.
I really doesn't take a year for a new employee to become productive. That is simply wrong. In lower skill industries, like the restaurant business which is being the most aggressive in conversion of employees to part time, a new staff member will be fully productive in a matter of days. I really question what possible business you could be in that requires a year on the job for a new staffer to become productive. I have worked in senior management positions in the military, government, and private sector and I'm calling BS.
Audits are a way of life and those costs are baked into your overhead. No company is going to pay about $1,000 per month per employee plus the ancillary costs of administering it when they can point their employees towards an exchange and be done with it.
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dianabug streiff • 15 hours ago
streiff - I own a very small service business - 17 employees (full time) and we have route work - 1 person per truck - no way to "cut back" here. I realize they keep saying this won't apply to my company, but in a lot of ways it will. I have offered insurance for years for my employees and only 5 have consistently signed up. We started off with an HMO and are now in an HSA, but I understand they are regulating the HSA's out of existence. So we will be forced to find another plan AND this year 12 of my employees have decided to go with the insurance we offer - more cost for my company. Why are they signing up? Because they know they will be forced to soon, so they decided to bite the bullet now.
When I was young (40 years ago) insurance was something you bought on your own, if you wanted to - I wish it was that way now, for that matter I wish a lot of things were they way they were 40 years ago.
I don't know anything about you, but I can tell you that there are many business owners who really do try to do the right thing for their employees, and in doing so, our "profit" is extremely low - like less than 5% on a regular basis. So Audits really aren't baked into my overhead and not something I would ever want to endure. I agree with Americanmale and know that even in our business it takes several months for people to learn all the things they need to know to be fully productive.
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americanmale streiff • 10 hours ago
I understand your premise that "Obamacare" is an anti-jobs strategy i.e. one that results in job loss, but in reality, that just isn't so.
Rather, Obamacare has an inflationary cause-effect on the forefront with an ultimate goal of achieving government single payer healthcare.
It is not "simply wrong" that employees require a year to become productive.
Master electricians have to have years of work experience and demonstrate aptitude for licensing. Master plumbers have to have years of experience and demonstrate aptitude.
Master carpenters have to have years of experience. For example, look at the wall in front of you. Odds are, the subcontractors that hung that sheetrock you're staring at had to have years of experience otherwise, their small business wouldn't get the job from the GC in the first place.
Do you talk on your cellphone? Well, odds are that a small company of about 7 or 8 guys installed the antenna that you are communicating with.
Are you using a desktop computer in a government office. Well, the company that installed the wiring had to have licensed telecommunicatins engineers on staff with years of experience otherwise, they couldn't even bid for the work.
And clearly, you've never bid a government contract. Ever see the experience requirements that comprise those manpower positions?
The point is, no company is going to lay off their workers because of healthcare. They need the experienced staff in order to continue to do business. THERE IS NO MORE EMPLOYEE FAT TO TRIM. Thus, they'll raise prices (inflate).
And finally, as for the question of what business i am in...(ie the peeing contest of credibility for arguments sake) well, I don't want to go down that path as that becomes personal in nature which is against the spirit of discussion redstate as always provided. I can if pressed though. Remember, however, that we are ultimately all on the same side.
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streiff Mod americanmale • 10 hours ago
From this it is pretty clear you don't know what you are talking about, Virtually nothing you said here is either true, or when it is true it isn't germane. I guarantee you I know a helluva lot more about government contracting, from both sides competing for and evaluating proposals, than you do in your ratty little travel agency. Real companies hire people to meet qualifications all the time. And they had better his the ground running.
It is equally obvious that you really don't know what "inflationary cause-effect" is.
But as Mark Twain said, never argue with idiots, they just drag you down to their level and beat you with their experience.
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jayjayson • a day ago
Just think, in a few days/weeks/months/ or even years, the only people with employer paid health care will be government employees and those working for companies with less then 50 employees. To give prospective on the cost already, I work for the govenment, it cost me $4800 per year for health insuance. As of Jan 1st, I will owe in taxes and additional $960 per year to the Feds. I am only making $22K a year working ofr the governemnt. I work 3 jobs, for close to 60 hours a week, plus am involved in 3 other oganizations that work in the community. My wife, the bread winner, has been out of work for 6 months. So a family of 4 living on less then 33K a year. Since June I have been working to get a few things up an running which would change the equation. However since the election, those companies have pulled back. Two part time jobs that could have neted up to $50K a year are gone. Why? Because both companies would be over the part time employee number, or the hours we work could be more then 30 for 4 weeks, but next to nothing for the next 4. Just an added prospective.
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jerseygalnny • a day ago
Great column. As pointed out, the employer owns the health insurance, even when the employee is paying a hefty part of the premium. Most do not realize that your employer most likely owns your sick leave too. Most also do not realize that the employer's primary goal is to turn a profit (talking private sector here), not to enhance the living standard of its employees. The statist has done a great job over the decades, indoctrinating a majority that they are entitled to stuff from the government.
I'm posting this on FR http://fundamentalrefounding.n... and will link back here from that site.
God bless,
JG
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Kyle-MI jerseygalnny • a day ago
Slight correction. You said, "The statist has done a great job over the decades, indoctrinating a
majority that they are entitled to stuff from the government." It should be "The statist has done a great job over the decades, indoctrinating a majority that they are entitled to stuff from their employer as forced by the government." They think it is free stuff but you cannot fool accounting. Everything has to be paid for. Every employee has to earn enough for the company to make all they are being paid for (salary and benefits) worth while.
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anonymouscitizen jerseygalnny • a day ago
As for sick leave read the other day that in Portland OR some people are trying to get the City of Portland to mandate that all employers in the city offer sick leave/private time off for all employees.
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Ann_W anonymouscitizen • a day ago
Connecticut already did this. ... And the jobs just keep leaving.
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carolina • a day ago
"Now the demographic Obamacare sought to help is finding itself not only
without health coverage, it is also required to work two jobs to make
ends meet."
The hubris of govt slugs makes my blood boil. The 'one size fits all and covers all' is a complete waste of resources. Young people will be charged overly high premiums because the law says that older people can't be charged premiums above 3X of younger people. No caps on annual and lifetime use creates unlimited exposure for the insurance companies. How do they price unlimited liability? That creates a big increase in premiums right off of the bat. I could go on and on ....
Of course employers will do anything they can to reduce costs to their business - including reducing employees and using contractors. I expect a boom in contract employees (who have to provide their own healthcare). Just watch..... Full time permanent employees will go the way of the dodo bird. (this was already happening in some industries because of benefit costs) Use of contract employees is going to explode.
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WmCraig • a day ago
We cannot make the Democrats look bad. We can't beat them with propaganda. What we can do is let them be free to act without restraint. There ideas don't work, they always get it wrong, the unintended consequences always out weigh the benefits. The best way to attack the Democrats is to yield to their onslaught until they overextend themselves and these unintended consequences become vulnerabilities that are exposed for all to see. Hold them to their promises and fulfilling their good intentions. The best way to make the Democrats look bad is to let them try to do good.
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dpmaine WmCraig • 20 hours ago
This is a super dangerous path. Their are a lot of people going to be getting very large "Checks" (tax credits) for buying health insurance. Up to 80% of the cost of the a family policy (so, in the range of $8000/year, inflation indexed).
The taker class will line up at 4AM to take something for free, in the rain, in the snow, under a bridge.
As soon as people get something for next to nothing, a lot of the little problems will melt away in their minds.
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dsmurf dpmaine • 16 hours ago
Obamacare expands the taker class, minimizes encentives to work more at certain thresholds, trying to read an article on it makes my head hurt cause I can't remember all the ins and outs of it all.
I hear a new rule will go to tax tobacco users, generally low income people, imagine headache of verifying a tobacco user for everyone in order to avoid the surtax. How will it handle once in a while premium cigar smokers?, taker and producers alike may get hung up on this recent development.
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wtbrewer • a day ago
There is huge irony in the unintended effects of ObamaCare. Consider the following quote:
"Employers began offering health insurance as an employee benefit during the 1940’s, when wage controls limited pay and employers sought to compete for scarce workers, marking the beginning of the trend toward employment-based health insurance coverage for workers." ("Health Insurance in the Small Business Market: Availability, Coverage, and the Effect of Tax Incentives" by Quantria Strategies, LLC, Cheverly, MD, for SBA Office of Advocacy, released Sep 2011.)
As Streiff's article indicates, ObamaCare has begun and looks likely to eliminate employment-based health insurance altogether.
The irony here is that it was the unintended consequences of government intervention into the marketplace that led to the association of employment with healthcare and it will also be unintended consequences of government intervention that will eventually sever that association.
billb
http://historeo.com/web/?p=170...
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johnms wtbrewer • 17 hours ago
The elimination of employer health benefits may turn out to be a good thing in the long run. Health insurance is the only insurance that you lose when you lose your job. If you change jobs, you don't have to change your homeowners insurance, your auto insurance or any other insurance except for your health insurance. Furthermore, the structure of employer-provided health insurance conceals the real cost of health insurance by having your employer "pick up" half or more of the cost -- which really amounts to part of your paycheck that you never see.
A far better system would be where individuals buy health insurance from nationwide insurance companies from the same insurance brokers that they buy their home and auto insurance from. They would have a wide spectrum of choices. Insurance companies would be unable to conceal the true costs of their products behind "employer contributiions", and being responsible for the full cost of their insurance, workers would choose plans more in line with their actual earnings. Their health insurance would stay with them as they changed jobs and they would be better able to stay insured during periods of unemployment or underemployment.
Ironically, Obamacare might be the catalyst that forces the dissolution of employer-based health care. Progressives think that this is a one-way street towards single-payer, but the opposite may be the case. Once everyone is buying insurance from private insurance companies through cumbersome, expensive and maddening government exchanges, the most logical way to streamline the process would be to simply abolish the exchanges and let individuals purchase insurance directly from the insurance companies. The trick will be in finding ways to make the scenario play out this way.
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streiff Mod wtbrewer • 21 hours ago
that is a nice bit of trivia. Thanks. You may see this again soon.
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rbdwiggins • a day ago
Well, the historical average of liberal/progressive policy remains intact.
The Law of Unintended Consequences rears its ugly head, repeatedly smites those that voted the Democrats into office, sticks the public with an enormous bill that comes in at least three times the original estimate, and if the American people are really lucky, the policy doesn't destroy the American family in the process.
In this case, the greatest health care system in the world might not be so lucky. It certainly won't escape unscathed.
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trueamerican2008 • a day ago
Obamacare is only about forcing the USA to a single-payer, government-run healthcare system. What better way to have power and control over the country and it's citizens?
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commonsenseobserver • a day ago
So what do we have to offer those who are hurt by Obamacare, including the uninsured themselves? What kind of society does the Republican Party have in mind, and what specific policy initiatives does it have to achieve it.
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DerKrieger • a day ago
Does Disqus ever work right? Jeez!
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jerseygalnny DerKrieger • a day ago
Could be your browser?
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DerKrieger jerseygalnny • a day ago
iPad.
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Bill S Mod DerKrieger • a day ago
It mildly sucks on the iPad (which I use the majority of the time also). The biggest problem is its failure to scroll to specific comments accurately....but that's far from all.
Disqus is a POS. I'm hoping we come up with something better. It's as miserable of a failure as a commenting engine as Obama is as a president.
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