The Devastation That Is Obama Care, Part 4: More Restaurants Cutting Hours, Massive Conflicts Of Interest, And Middle Class Taxes

This is the fourth part in our series on how the rapidly approaching Obama Care taxes, regulations, and idiocy are about to crash down on us, our lives, and the economy. We have already reviewed how Americans are losing their jobs or seeing their working hours greatly reduced as a result of the legislation, how it will be next to impossible for the Federal government to meet its deadlines regarding data systems, customer service, etc. as defined by the law’s schedule, how about two thirds of the states opted out of some components of the law, how politicians who originally voted for the legislation are now trying to unto parts of it to protect their political careers, etc.

The next set of insults to our intelligence and fiascoes are listed below:

1) Back in September, the Washington Examiner ran an article that covered the International Franchise Convention in D.C. Specifically, the article reviewed a presentation given by David Barr, an Atlanta business owner of Taco Bell and Kentucky Fried Chicken franchises. Mr. Barr had done the Obama Care math as it affects his operations, showing how devastating it will be to his business and his employees:

• Obamacare will likely cut his profits in half overnight.
• He showed that small businesses’ only choice is to slash employee hours so they aren't eligible for company-paid health care or stop offering insurance and pay the $2,000 per employee fine.
• Barr has 23 stores with 421 employees, 109 of whom are full-time. Of those, he provides 30 with health insurance.
• He currently pays 81% of their Blue Cross Blue Shield policy, or $4,073 of $5,028 for individuals, more for families, for a total bill of $129,000 a year. Employees pay $995.
• Because of Obama Care, however, he will have to provide health insurance for all 109 full-time workers, a cost of $444,000, or two and half times more than his current costs.
• That $315,000 increase is equal to just over half his annual profit, after expenses, or 1.5% of sales.
• As a result, he said, "I'm not paying $444,000."
• Providing no insurance would result in an Obama Care fine of $158,000, $29,000 more than he now spends but the lowest cost possible under the legislation.
• As a result of Obama Care and the above reality math, he'll either cut worker hours or replace them with machines to get his costs down to offset Obama Care fines and taxes or dump his employees on the public health exchange and pay the fine

In addition, his experience shows him that most of his low-wage workers he would have to cover under Obama Care won't even take it because their $995 share is too high, meaning those the program was set up for won't see any benefit. And those who do will because they have major health issues, likely resulting in higher premiums to him, lower business profits, and less economic growth and benefit.

Cutting jobs, cutting hours, a real life example, and the math to support it, why Obama Care is going to devastate small businesses and the economy.

2) In mid-November, a Florida news report reported on a Florida restaurant owner. who operates roughly 40 Denny’s locations and five Hurricane Grill & Wings franchises in Florida, Virginia and Georgia, and his intention to add a 5% surcharge to customers’ bills to offset costs from Obama Care once it hits in January, 2014. beginning in January 2014: “People are trying to find ways to avoid the penalties and to avoid having to pay for Obama Care,” said restaurant owner John Metz . “Everyone’s looking for a way to not have to provide insurance for their employees. It’s essentially a huge tax on all us business people.”

As with other businesses, Metz also plans to cut hours of many current employees to under 30 hours to avoid the administration’s definition of full time and thus, sidestepping having to pay for health care insurance.

Metz is a little different from other small business owners, according to the article in that he thinks that getting everyone health care insurance is a good idea and should be pursued but that this is not the right way to do it. His business model cannot afford Obama Care’s requirements, requirements that would add over $3 million to his expense stream every year, an expense he cannot afford: “I have a choice: try to live within the rules, or go out of business.”

3) It should come as no surprise, given this administration’s vast experience and immersion in cronyism that Obama Care would also be infested with serious instance of cronyism, payoffs to friends and favorable entities using taxpayer resources and wealth as the currency. Consider the incest and cronyism that is apparently playing out relative to the development of the health care exchanges, as reported in the Weekly Standard on December 12, 2012:

• Health and Human Services (HHS) contracted with a subsidiary of a private health care company to help build and operate the very Obama Care health care insurance exchanges in which that company will be competing for business, a blatant conflict of interest.
• How did this happen? Apparently, the person who ran the government entity that awarded that contract has since accepted a position with a different subsidiary of that same company.
• HHS, in an attempt to hide this potential conflict of interest contract from the public until after the election, encouraged the company to hide the activity from the Securities and Exchange Commission.
• According to the inside source quoted in the article, in January, HHS awarded Quality Software Services, Inc. (QSSI) what The Hill reported as “a large contract to build a federal data services hub to help run the complex federal health insurance exchange.”
• At that time, the director of Obama Care’s Center for Consumer Information and Insurance Oversight (CCIIO), the enitty tasked with creating the operational rules for the Federal exchanges,was Steve Larsen.
• He had been the insurance commissioner for Maryland when Obama’s HHS secretary, Kathleen Sebelius, was the insurance commissioner for Kansas, The article reports that the two are reportedly close.
• The CCIIO awarded the Obama Care exchange contract to QSSI while Larsen was the CCIIO’s director.
• Under the contract signed with HHS, QSSI’s power would be significant since QSSI would create, operate, and affect companies’ ability to sell insurance through Obama Care’s Federal exchanges.
• The article quoted another The Hill report quote: “A draft statement of work for the contract awarded to QSSI states the contractor should provide services necessary to acquire, certify and decertify health plans offered on a federal exchange. It stipulates the contractor should monitor agreements with health plans, ensure compliance with federal standards and” — somewhat strikingly — “take corrective action when necessary.”
• QSSI, apparently realizing what a valuable asset it had in the contract and the power and information generated by this Federal contract, started shopping itself around to prospective suitors within the health care industry.
• In the meanwhile, Larsen left the CCIIO and took a highly paid position with Optum, a subsidiary of UnitedHealth Group, in June, 2012.
• Surprise, surprise, this summer, UnitedHealth Group bought QSSI.
• Another quote from The Hill: “One critic familiar with the business rivalries of the insurance industry compared UnitedHealth Group’s purchase of QSSI to the New York Yankees hiring the American League’s umpires.”
• The Weekly Standard writer presents the following analogy of this mess: “In other words, UnitedHealth Group, through QSSI, would be able to police the same field in which it would be a competitor.”

But it gets worse. According to the article, when the administration found out about this massive conflict of interest, it decided to try and bury the mess until after the November elections. Thus, the merger was never reported to the SEC as required by law. This potential breaking of the law is currently being looked into by the Senate Finance committee.

HHS and the administration has gotten itself into a further bind in that if they tried to void the contract, now owned by a major health car insurance provider, they will never make the deadline laid out by the legislation to have health care exchange up and running by January 2014, even if they could get it done by then.

Conflict of interest (which always sub optimizes the use of taxpayer wealth), missed deadlines, suppression of truth, breaking of SEC laws. Yep, this is a great piece of legislative work.

3) The Associated Press recently ran an article describing an pending new tax that could come about as a result of Obama Care. We have previously reported that Obama Care introduces almost 2,000 new Federal regulations and dozens of new taxes, from medical device taxes, to new Medicare taxes, to taxes on the sale of high end homes, to higher dividend taxes, etc.

Many of these taxes play into Obama’s continual class warfare rhetoric and strategy in that they only touch the higher earning Americans. However, this new tax idea reported on by the Associated Press would squarely hit middle and lower income earners.

According to the article, about half of all Americans benefit from the tax-free status of employer health insurance. Workers pay no income or payroll taxes on what their employer contributes for health insurance, and in most cases on their own share of premiums. It's the single biggest tax break the government allows, outstripping the mortgage interest deduction, the deduction for charitable giving and other better-known benefits.

If the value these of job-based health insurance benefits were taxed like regular income, it would raise nearly $150 billion in 2013. So, let’s do some simple math:

• There are about 315 million people in the U.S.
• If indeed half of them have tax free employer health insurance, then there are about 157 million Americans in this situation.
• If we divide the $150 billion raised by the likely 157 million or so citizens who will be paying the tax, we see that each American in this situation would be expected to pay about $950 or so each year to the Federal government under this tax scheme.

This is $950 that a typical American would not be able to spend on movies, restaurants, clothing, vacations, etc., economic activity that would grow the economy and create jobs. And as we have proven any number of times in this blog, that $950 will never be spent by the Federal government and Washington political class in an efficient, effective, beneficial, or non-criminal fraud manner.

And this would certainly break Obama’s pledge that the vast, vast majority of Americans will not pay more in taxes during his administration. But this behavior is not new or unexpected as the Obama administration has broken so many pledges already, what is just one more that costs the average American almost $1,000 a year for very little benefit in return.

The bad news just keeps on coming from this worthless piece of legislation, with more falling down on us tomorrow.

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