- Howard Dean is the former Democratic governor of Vermont and former head of the Democratic National Committee. He is a die hard supporter of Democratic Party policies and politicians including President Obama.
However, according to various news reports, last week even Howard Dean admitted that many Americans will lose their current health care insurance coverage from the companies they work for: "Most small businesses are not going to be in the health insurance business anymore after this thing goes into effect." Sometimes even a member of the political class can state the obvious.
However, Mr. Dean went on and tried to actually spin this disaster as a positive, trying to position this loss of health care insurance as a cost reduction for small business. Thus, his brush with reality lasted only a short time. While businesses that drop their company health care plans will see an expense reduction, the need for health care insurance for their employees did not go away, it just moved to other sources. Obama Care did not fix anyting, it just changed the source of health care insurance for Americans working for these small businesses.
It also undercuts Obama's two main promises that he made in the run up to the passage of Obama Care. First, Americans could keep their current health care insurance coverage, the passage of Obama Care would not affect current coverage. He failed to mention, either intentionally or ignorantly, that you will not be able to keep your current coverage if your employer drops their company plans altogether.
The second broken promise is that this legislation would not add to the national deficit. Well, if numerous small businesses drop their coverage, forcing Americans into the Federally subsidized insurance exchanges, that will add significantly to the national debt. Again, this did not solve any insurance problems, it is just moving the costs from the private sector into the national debt riddled Federal government.
- Last week, news reports from various sources reported on how another part of Obama Care is collapsing. The old age, long term care component of the legislation, the CLASS Act, has failed miserably to live up to forecasted expectations. The Health and Human Services Department has put an indefinite hold on the program.
The Department has reassigned all of the employees working on the program since the benefits CLASS offers are meager while the price is high relative to other long term care program available in the private sector. High cost, low benefit, sounds like a typical government/political class program.
The bigger issue with this cessation is that the CLASS portion of Obama Care was a huge cash positive for the initial years of the Obama Care business plan. Since this program was for long term care, care that would not likely have been paid for until well into the future, the positive cash flow expected from CLASS made the overall financials of Obama Care somewhat palatable. However, with the termination of the program, at least temporarily, the financial underpinnings of Obama Care take a beating as does the national debt.
- But there's more. An article by Diana Furchtgott-Roth from September 15, 2011, writing for Real Clear Markets, vividly illustrates how ignorant the Washington political class is when it comes to basic business dynamics and financials. And this ignorance may be a leading cause for our persistently high unemployment rate.
According to Ms. Furchgott-Roth, as a result of Obama Care, starting in 2014, any business with more than 49 full time employees will be assessed an annual tax of $2,000 per worker if the company does not offer the right kind of health care insurance coverage. And although the tax does not take effect until 2014, Ms. Furchgott-Roth accurately sums up how people run a business: "Although the tax will not take effect until 2014, businesses are adjusting now. They are not stupid, they plan ahead."
Which is where the stupidity of our political class comes into play. In 2014, if a company employs 49 people and does not offer health care insurance, the annual Obama Care tax is $0. If that company employees 50 people and does not offer health care insurance, the annual tax is $40,000, since the first 30 employees are exempted from the tax. Thus, in this example, the annual Obama Care cost of adding one employee is $40,000, a substantial expense for a small business owner.
Most buisness owners are not stupid. They will not hire that 50th, 51st, 52nd, etc. employee and incur the unnecessary expense. But this behavior will contribute to the unemployment situation in the nation. The article points out that there are about 828,000 franchise businesses in American today, most of whom employ under 50 workers. If each of these businesses do not hire two people on average to avoid the deadly 50 employee level, than upwards of 1.5 -2.0 million jobs will not be created as a result of Obama Care tax implications. 1.5 million new jobs would reduce the national unemployment rate by at least a full percentage point just from franchise businesse. Additional jobs will not be created from non-franchise businesses.
Consider another example from the article. Assume a small business employs 55 full time workers and 7 part time workers and does not offer health care insurance. If the business owner does nothing, in 2014 he or she will have to pay an Obama Care tax of $50,000 a year. However, if the owner changes the employee mix to 49 full time and 19 part time, that $50,000 annual tax goes away.
Now ask youself, something the politicians in Washington obviously did not do: what will the ratiotnal business person do? Spend $50,000 more a year or contribute to the underemployment problem in this country by downgrading full time empoloyees to part time employees?
One more example of the bad unintended consequences of this legislation, particularly as it applies to franchise owners. Many franchise owners may own several franchises from the same company. Consider the hypothetical situation where a small business owner owns ten Dunkin Donut franchises.
While each location likely employs less than 50 employees, the business owner of the ten franchise locations will definitely employ over 50 people. Thus, unless he or she offers health care insurance, the owner will get hit for an annual tax of $2,000 a year for every full time employee over 30 across the ten locations.
What is the typical business owner likely to do? Not being stupid, he or she is not going to pay the tax. They are much likely to incur a one time legal expense to set up each location as a separate shell company with less than 50 full time employees to avoid the bigger, recurring annual expense of Obama Care. The other alternative is to make almost all of their employees part timers, further contributing to the underemployment situation in this country.
In either case, Obama Care is forcing small business owners to take time out from growing their businesses, and the economy, by finding ways to avoid the onerous financial implications of Obama Care. These implications are restricting employment growth and preventing unemployment and underemployment reductions, without solving the basic, core problems of escalating healthcare costs.
- And one last piece of avanlanche, courtesy of ana analsyis done by Investor's Business Daily that was published in late September, 2011. According to this analysis, some Americans may not be able to take advantage of some of the benefits in Obama Care because of how carelessly the law was written.
For Americans that are forced out of their current compny's health insurance plans or who never had coverage in the first place, Obama Care set up so-called health care exchanges where someone could purchase insurance coverage on their own. If their incomes fell in the 100% to 400% range of the Federal poverty level, they would be eligible for Federal taxpayer funded subsidies to help pay for their insurance exchange health care coverage.
Part of the Obama Care legislation instructs states to set up these health insurance exchanges but does not require them to do so. If a state does not set up exchanges, than the Federal government can set up a Federal health care exchange in the state.
However, and this is where the big screw up appears, the way the Obama Care law was written, an American cannot get subsidized health care insurance coverage from an exchange unless they are enrolled in a STATE run health care exchange. Those that are enrolled in the Federal exhcange, even though their state did not offer a state exchange, are out of luck.
Think about how stupid this set up is. The Federal government, which is setting up these Federal exchanges as required by the law, does not cover Americans with subsidized health care premiums that are in the Federal program.
The article reporting these findings indicated that six states have already said they will not set up state exchanges (12% of the nation's states) and numerous other states are likely to follow suit. Thus, a large segment of Americans will not be able to get the Federal help they need to purchase insurance, insurance that the Federal government is forcing them to purchase, even though other American citizens will get financial help. Insanity.
How important is the massive oversight? According to Michael Cannon, director of health policy studies at the Cato Institute, who was quoted in the article: "The whole structure of the law collapses without a state run exchange." Obviously, there are legal, Constitutional, and just plain fairness issues in this situation, issues that would probably have to be settled by reopening and fixing the legislation or going to court, adding more uncertainty to the world and the economy because of Obama Care's sloppiness and incoherence.
Unbelievable. A piece of legislation that was supposed to reduce health care costs does nothing of the sort. A piece of legislation that was supposed to allow people to retain their current health care coverage does nothing of the sort. A piece of legislation that was supposed to actually reduce the national debt does nothing of the sort. A piece of legislation that was supposed to add four million jobs to the economy (Nancy Pelosi's broken, inane promise), does nothing of the sort and actually reduces employment growth. A opiece of legislation that was supposed to help Americans pay for their forced purchase of health care insurance only helps certain Americans, based on geography. The avalanche continues.
As we get buried by the incompetence and negative unintended consequences of Obama Care, the root causes of the escalating health care costs in this country continue unabated:
- Americans eat too much.
- Americans eat too much of the wrong kind of food.
- Americans smoke too much.
- Americans do not get enough exercise.
- Americans have too much salt in their diet.
- America is getting older, leading to expensive health issues like cancer and dementia-like diseases.
- America has a busted health insurance competition model.
- America has a busted and expensive medical malpractice/legal model.
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