Obamacare will be great for the economy, but unfortunately it may not be for you
A few of the stated goals that have been mentioned about the Affordable Care Act are that it, the ACA, will lead to an increase in job growth, will jump start the economy, will bring back manufacturing to the United States and yes it will, even, pay down the deficit.
Those that oppose this bill scoff at those statements and reply that in no way is the law going to even come close to these goals let alone be good for the country, while those that back the bill believe that these statements are true, but who is really correct?
Amazingly, depending on how you define “what the country is” they are both very close to being right.
As more information is being disseminated each day about the ACA the one tidbit that everyone may still remember is the simple fact that companies with more than 50 employees will be fined $2,000 for each employee that does not provided health insurance each year.
Sounds like a big fine doesn’t it, but think about it; companies that provide health benefits for employees tend to pick up, on average, roughly 75% to 85% and the cost, on average, which is usually much higher than that fine of $2,000.
According to Kaiser Family Foundation, in 2013 the average annual premiums for employer-sponsored health insurance were $5,884 for single coverage and $16,351 for family coverage, while the employee contribution for this coverage was “on average 18% of the premium for single coverage and 29% of the premium for family coverage”.
The math would determine that employers, on average, paid $4,824.88 per individual health plan and $11,610 for every employee who opted for a family plan.
Now, with the new rules provided by the ACA, employers can “opt out” of this benefit and face a fine of $2,000 per employee.
The savings have the potential to be immense, since, also, according to the 2012 Kaiser Family Foundation and Health Research & Educational Trust “Employer Health Benefits” report, there were 149 million people covered under an employer health plan with roughly 54.7 million covered through an individual plan and roughly 94 million covered through a family plan.
By understanding these numbers it can be concluded, on a simplistic level, that on average, just by the math, employers spent about $1.2 trillion each year for family coverage and close to $264 billion in individual coverage or roughly $1.4 trillion in total premiums for the year.
Think about it, if employers just decided to pay that $2,000 fine for every single person, including the spouse and dependents of their employees, which they don’t have to do, how much would that bill total?
Close to $298 billion! The savings could easily be $1.1 trillion.
An extra $1.1 billion to the bottom line of corporate America, how would that look to investors, would stock prices increase just a little bit, and isn’t that how we judge the economy today, isn’t it all about the “economy stupid”?
The other great news is that instead of that $1.4 trillion heading to insurance companies in the form of premiums, this extra $1.1 trillion that companies now have could easily be pumped back into the economy through employer spending while sending an extra $298 billion to the federal government in the form of fines, which will quickly be labeled as “new” revenue.
And that $1.1 trillion, which may be pumped back into the economy, will, also, be taxed accordingly by the federal government.
This could easily lead to more manufacturing coming back to the United States due to the fact that the costs of each employee will have dropped and shipping materials to countries like China and India may not appear to be that sensible, especially if the cost of employees in those countries rise – all one needs to do is look at the Wall St. Journal / China report on rising employee costs.
The possibility of job creation now that the second largest cost employers face has all but vanished, could be extreme and again the stated goals of the ACA are create jobs, pay down the deficit, improve the economy and bring back manufacturing to the United States.
As for how the ACA impacts the employee this law may not be in their best interest as the, obvious, consequence is the probability that employees will no longer have access to employer funded health insurance.
This means that employees will now have to buy a health insurance policy not only for themselves, but also for their family on the public market where they will be taking the risk of being in a small individual plan instead of being part of a larger group.
The other factor, employees may now be in the position of having more of their income taxed by the government on both levels, since they will lose that benefit of having to pay for their healthcare with pre-taxed dollars.
Under the current rules of health coverage the amount of a person’s premiums were, for the majority of Americans, taken out of their paycheck pre-tax which lowered the amount of income the government could tax as revenue.
Now, with these new changes, and if companies implement this, people will be paying for their health coverage with after taxed dollars from income. This will lead to employee having more of their income taxed at both the federal and quite possibly the state level.
As for the jobs that the ACA may create; they may not be the boon for employees as well, since employers, under the ACA, will have the ability to skirt the issue of that $2,000 fine by only allowing employees the opportunity to work a total of 29 hours a week.
According to the ACA, on page 137 of the law, under the section titled “Employers shared responsibility”, the term full-time employee means any “employee who is employed on average at least 30 hours of service per week”.
If an employee is under that number of hours per week, average throughout the year, then the employer will not be faced with that $2,000 fine.
As stated, the possibilities that are mentioned in this article are just that: possibilities, but, unfortunately, the foundation has been set for any large company to act on it.