The best way to understand the Affordable Care Act (ObamaCare) is to realize that it confers large benefits on some people and imposes large costs on others.
If you are one of the ones who will qualify for expanded Medicaid, you will get something for nothing. Although there are quality issues and access problems, including rationing by waiting, Medicaid will probably spend $8,000 on an average family of four over the course of a year. Enrollment is like an $8,000 gift from the government.
If your income is a tad too high for Medicaid, you will get something even better. In a newly created health insurance exchange you will be able to obtain, say, a $15,000 family plan for no more than about a $600 premium. This is almost something for nothing.
Things will be very different if you have a job, however.
Consider a typical hotel. Almost everyone you see is earning about $15 to $20 an hour — the maids, the waitresses, the waiters, the busboys, the doormen, the porters, the custodians, the groundskeepers, etc. The cost of family coverage is equal to between one-third and one-half of these workers' annual earnings. The goal of ObamaCare is to force them to obtain this insurance with no extra help from government. And this is true even if the maids are already enrolled in Medicaid!
The economic literature on this type of mandate is clear. Although government can offer people something for nothing, the labor market does not. Employee benefits are not gifts from employers.
They are substitutes for money wages and other benefits. The cost of the employer mandate will surely be borne by the employees themselves. Mandated health insurance in Massachusetts, for example, was offset dollar for dollar by lower cash wages.
We can be fairly certain that low-wage workers and their employers will be searching for ways to avoid the mandate. Why? If the employees were willing to spend half their income on health insurance they would have done so already. That they have not indicates they would rather spend the money on something else.
Here are some options:
Stay Small. As long as employers restrict their workforce to no more than 49 employees the mandate doesn't apply. We are already seeing news reports of this type of response. But here is a warning: the IRS has signaled that if an individual owns, say, three separate businesses, it will treat them as one business — not three! ObamaCare will not only discourage small businesses from growing, it will discourage entrepreneurs from acquiring other businesses.
John C. Goodman is President and CEO of the National Center for Policy Analysis, Senior Fellow at The Independent Institute, and author of the acclaimed book, Priceless: Curing the Healthcare Crisis. The Wall Street Journal and National Journal, among other media, have called him the "Father of Health Savings Accounts." He is also the Kellye Wright Fellow in health care. The mission of the Wright Fellowship is to promote a more patient-centered, consumer-driven health care system.
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