Some of the ugly details of Obamacare, the most far-reaching piece of legislation to be passed without a single member of Congress having actually read it—indeed not even having been allowed a serious chance to read it—have only been gaining attention in recent months. Looking forward to 2014, employers are now looking at an additional $63 per insured employee fee to compensate insurance companies for the added costs of covering previously uninsured people with pre-existing conditions. That’s supposed to phase out by 2017, but if you believe that you probably also bought the line that Obama is in favor of a “balanced” approach to deficit reduction.
Better known is the $2,000 per employee charge that any business with more than 50 full-time employees will have to pay for every full-time employee to whom that business does not provide an Obama-approved health package (though the first 30 such employees are exempted). With all the concern expressed in the media about how the uncertainty posed by the fiscal cliff negotiations negatively affects business, it is odd that so little attention has been focused on the certainty of Obamacare costs that businesses now have to face. Many companies, large and small, have pointed to these provisions, explaining that this is why they won’t be hiring, or won’t be hiring nearly as much in 2013 as they would otherwise. Abbott Labs, Boston Scientific, Welch Allyn, and many other companies have even reported they will be laying off workers directly as a result of Obamacare.
I’m in the commercial real estate business, and have managed commercial properties for more than 20 years. A friend of mine has been in the real estate services business, providing everything from janitorial services to window washing to parking lot repairs for about as long. In fact, the company I work for was his first account. In the last 20 years, he has expanded from a handful of full-time employees to 150 full-time employees. I recently discussed with him his concerns about the effect of Obamacare on his business. Most of his employees are in lower-skill occupations and so only earn $10 – $15 per hour. He cannot afford to tack on health care benefits equal to another $3.50 to $5.50 per hour without going broke. His more affordable alternative would be to pay the $2,000 per employee fee, which would effectively erase his entire 2012 profit from his business. In essence, this one provision is the equivalent of a 90% – 100% tax on his typical net business income. Worse yet, since the law does not allow the $2,000 per employee charge as a deductible business expense, he’ll have to pay federal income tax on approximately $240,000 of business income he didn’t get. Implicit in the law (or perhaps it is explicit) is the notion that it is the responsibility of employers to provide health insurance to their employees, and if they don’t they are bad people, greedy capitalists exploiting the working class, and deserve to be punished.