Last month I devoted my space to the Employer Mandate that is a key part of the Affordable Care Act (ObamaCare). So, of course, the start date of this provision has been extended for one year. Given that an extension of the implementation date is not a repeal, employers should keep my brief summary for later reference. 2015 will be here before we know it.
Politically speaking, the mountain of issues in administering the law, the job losses, the losses of existing insurance coverage and the momentous rise in costs that are facing everyone from carriers to purchasers were not supposed to happen. In fact, it was advertised that administrative costs and premium costs would be reduced and that everyone could keep their insurance carrier and doctor. But, as is always the case, there are many unintended consequences resulting from the law.
So what are some of the unintended consequences?
The new sub-30 hour work week — There are many industries where health insurance coverage of employees has never been the industry standard. Topping the list is hospitality. Restaurants, hotels and others in this industry have rarely covered employees with insurance. The profit margins are simply too small. As a result of the new law, a less than 30 hour work week is quickly becoming the norm. What this means to employees is that to earn a “full-time” wage will require working for two different businesses and still not having health insurance coverage. I recently read an article that reported of all “new jobs” created in the past few months, 75 percent of them were part-time. Employers are adjusting.
Look back is causing early business model changes — It most likely sounded like a great idea to give employers another year before implementing the employer mandate. The problem is that the law contains a “look back” period that includes the prior year. This means that in preparation for the original 2014 kickoff, employers needed to take action in 2013. Now, even with the extension, what employer is going to switch gears and undo already implemented new business models? The extension will simply work to give additional employers a chance to study and implement a plan to minimize costs from the law that best fits their business.
Synchronization problems — In addition to the employer mandate, there is a personal mandate. For it, there are to be exchanges, now called market places, that include federal subsidies for those that qualify. But to qualify, an individual must meet income and other guidelines. Before a subsidy is to be paid, the law provides for verification of the application’s contents. This verification includes checking the records pertaining to this individual at the IRS, Federal Labor Department and Health & Human Services Department, the State Income Tax Records, Unemployment Department Records, and other State Departments of all 50 states for each application. Really, someone actually believed this was even possible? I have spoken to IT specialists that doubt this can ever be done due to the variety of hardware and software that is/was used. The result is a policy that I read about that will simply believe the applicant without checking for accuracy.
Job losses due to new taxes — The new sales tax on medical devices has already started. In fact it is helping drive down the federal deficit. The tax is a bit more than 2 percent and surely seemed affordable to the authors of the law, but few medical device companies have a profit margin that high. Research and development are expensive and worldwide competition prevents passing the tax on to customers. So the reaction has been to lay off thousands of scientists. Beyond the unemployment that has been created, what medical advances will not take place due to the law? As other new taxes are implemented over the next few years, job losses will occur in all areas where the taxes cannot be passed along to consumers.
Individuals losing existing insurance — Everyone was to be able to keep their insurance and doctor. Well, many recent articles have outlined the problem — policies that people are perfectly happy with do not meet the minimum standards of the law. Those policies will be subject to penalties, costly upgrades or removal from the market, and I have not even mentioned the Cadillac Plan Tax if your existing plan is too good in the eyes of the new law. This tax is 40 percent so those declared as Cadillac will definitely be downgraded.
The Affordable Care Act is not alone in creating unintended consequences. This is a fact of life in the enactment of all laws because “Americans always find a way.” But with a law that is so universally encompassing, the consequences are more pronounced and will affect everyone.
Editor’s Note: Michael Evanish is the manager of MSC Business Services, a member service of the Pennsylvania Farm Bureau. For more information, call 717-731- 3517.