A few weeks ago President Obama took the unusual step of involving himself in an administrative matter that would have been otherwise handled by people many levels below the Oval Office. He personally crafted a “solution” to a problem affecting medical benefits for a small group of federal employees.
The employees were members of Congress and their staffs. The problem was Obamacare.
In one of the few sensible provisions of the Affordable Care Act (ACA), Congress is required to participate in the Health Care Exchanges. These are the online “marketplaces” that will open on October 1st, 2013, and they’re supposed to offer insurance and subsidies for people who can’t afford to pay on their own. The subsidies are critical because basic, low-cost options will no longer be available. Every American must have high-end coverage that comes with a high price tag.
The problem for folks in the exchanges is that the subsidies are based on income. Guess which group makes too much to qualify? Right: members of Congress and their staffs. And until the President stepped in, it wasn’t clear that their employer, the government, could make up the difference with its own contributions.
What a perfect irony. Many of the same lawmakers and staffers who forced Obamacare on the rest of us were facing the unintended consequence of having to pay for it. Members of Congress were considering retirement and their aides were threatening to leave, triggering what they self-servingly called a “brain drain.” So, President Obama came to the rescue. He announced a fix that exempted Congress and its employees from having to bear the load.
Millions of others aren’t so lucky. Labor unions were crucial in the Obamacare fight. They spent millions to convince wobbly Democrats and voters that the law would be good for everyone. They don’t feel that way anymore. This year three of the biggest unions sent a letter to the President warning that the ACA was shattering the American Dream.
The law requires all employers with 50 full-time workers to offer very pricey insurance or pay a smaller fine. And it defines full-time work as 30 hours. Many businesses, including union shops, have adjusted predictably by canceling their insurance or by converting full-time workers into part-time workers. Here the unintended consequence is pushing Obamacare’s cheerleaders out of full-time jobs with good benefits.
There’s no easy fix for them, however. Some unions were granted waivers early on and recently the President announced a one-year delay in the employer mandate. That won’t solve the problem, but it gives the President until after the 2014 election to come up with something.
Some companies aren’t waiting. The news is filled with stories about companies shedding workers, cutting hours and slashing benefits. UPS, for example, recently announced that because of the ACA it would cancel coverage for 15,000 spouses. Forever 21, a clothing retailer, announced plans to eliminate most of its full-time workforce. Restaurants, hospitals, local governments and colleges are taking similar steps.
Could this be the future, a mostly part-time economy in which good benefits are rare? Economists can’t agree, of course, but recent jobs reports show a pronounced increase in part-time employment and very little growth in full-time jobs.
Economic data can show jobs disappearing and the number of people filing for unemployment. But it can’t show the jobs that are never created.
The National Federation of Independent Business (NFIB) is the country’s largest advocate for small business owners. For several years our Optimism Index has been at recessionary levels. Small businesses have consistently been reluctant to hire new workers. That’s partly due to a lack of consumer demand. But they’re also very worried about the regulatory and tax consequences of creating jobs. Obamacare is particularly onerous.
Remember, businesses with 50 workers must offer insurance. Thousands of our members are near that threshold. Hiring more people would trigger massive new costs. So they’re in a holding pattern, trying somehow to compete without growing.
More seriously, the vast majority of small businesses buy insurance on the individual market. They’re subject to the Individual Mandate which takes effect on October 1. No exemptions. No delays.
Most will be forced into the exchanges. The low-cost policies that they favor won’t exist. Very few will qualify for subsidies. All of this means that small businesses are facing higher costs and big disruptions immediately. They’ll have to choose between Cadillac coverage they may not want or can’t afford, or going without insurance and paying the fines.
Obamacare is the Law of Unintended Consequences. Despite its name, the Affordable Care Act is raising the cost of insurance for almost everyone who pays for it now. It threatens full-time work that is the pathway to the Middle Class. It’s hurting corporations and their employees. It’s punishing the unions and medical providers that backed it. And perhaps most dangerously for the US economy, the law creates obstacles for small business owners no matter which way they turn.