ObamaCare Implementation Gets Easy

Ezra Klein takes to the pages of the the Washington Post to refute Jennifer Rubin’s WaPo article contending that ObamaCare can’t be implemented given the recent changes. Not only does he aver that, of course it can, but all of these changes make it easier than ever to do the job. In fact, he suggests that the administration is taking all the negative publicity in order to make implementation simpler.

Mr. Klein makes two points to support his argument. The first is that the employer mandate was going to cause all sorts of political problems and now that it’s been deferred the blowback from employees and employers will vanish.

The poorly designed employer mandate was perhaps the most serious threat the law faced in its first year. Only about 10,000 of the economy’s 5.7 million firms were expected to face the mandate, but that’s still a lot of angry business owners. And while some of those business owners would respond by grudgingly offering insurance, others would respond by cutting back on hours for their employees, or even firing some of their employees.

For Obamacare, the resulting headlines would be lethal. Add in that even businesses that were already complying with the mandate would have to follow  annoying reporting requirements to prove they offered insurance and the law had a real problem among a politically powerful constituency.

Now, it doesn’t. At least not until 2015, assuming the mandate actually begins then. That isn’t to say the delay is costless: The federal government will lose billions in penalty revenues, and some employers who would’ve begun offering health care will simply let their employees drift into the individual marketplaces instead. But in terms of implementation, Obamacare just got a lot easier to implement, if a bit pricier.

At least he admits that the decision was as much political as operational but, perhaps because he lives in the DC bubble, he badly underestimates the harm both political and economic that the mandate has already caused. Coyote Blog is written by a Phoenix small businessman who offered this observation on the rise in part-time employment we saw in the most recent employment report (here is an expanded post on his experience with PPACA).

It is unclear how the 1-year delay in the employer mandate implementation will affect this.  Probably not a lot — based on the way Obamacare was being implemented, companies needed to be switching workers to part-time now (really, early this year) so that they would qualify as part-time for next year  (a company needed 6-12 months of records from this year to prove the employee was part-time).  In other words, most companies have already switched, and having done so, will not likely switch back just for one year.

Besides, as I have written before, it is actually cheaper and easier for many retail establishments to stitch together full coverage of their business hours from part-time workers.   Making jobs full-time is a hassle, and was done by most of us mainly for competition reasons, ie to be able to attract the best employees.  Other laws like California’s absurd lunch-break mandate (which has caused me to make working through lunch a firing offense at our company) just add to the cost of offering full-time work.   If everyone is only offering part-time, and the labor market is weak with plenty of workers available, there is no reason to go back to offering full time employment.

The point obviously is that it’s way too late to close the barn door. Employers have already taken, in fact were forced to take measures to deal with the imposition of ObamaCare. The damage is done. I guess I don’t quite understand why delaying the employer mandate makes implementation easier, at least I don’t understand Klein’s argument. I do appreciate the fact that they can’t get the systems together and I get how that failure simplifies things in a perverse sort of way but that doesn’t seem to be the argument he’s advancing.

The second point in his article is that implementation is easier since we won’t be troubling people to prove they are entitled to insurance subsidies.

The consumer-information delay is a similar story. The question here is how the insurance marketplaces verify the income and insurance status of the people who come to them looking for help. If they don’t scrutinize the claims closely enough, some people who don’t qualify for subsidies may receive them anyway. But if they require reams of documentation, various parts of the process can break down as computer systems prove unable to talk to each other or people struggle to come up with the required paperwork. The result would be that people who do qualify for help don’t get it — a problem that bedeviled the first year of the Medicare Prescription Drug Benefit.

On Friday, the Obama administration said that in the law’s first year, they would accept the testimony of consumers when they applied for health insurance. That means that if you tell the government you make $10,000, the government simply believes you. There will be random audits, much as there are when you pay your taxes, but that’s about it. In 2015, the requirements will tighten further, and the federal government can claw back subsidies that were improperly awarded.

Here, again, the calculation is simple: The Obama administration made implementation easier — both for themselves and for the consumers — at the cost of making the bill a bit more expensive.

I like the new euphemism – consumer-information delay. Who dreams these things up? Anyway, it’s impossible to argue against the premise that allowing individuals to spin whatever tale they choose in order to secure health insurance and possibly subsidies to purchase it is simpler and easier to implement than a system which verifies their attestations. We could greatly simplify our tax system if everyone just sent in a check once a year with a note saying how much money they made. Simple is easy to get to but human nature suggests that it’s usually not a viable option.

If all of these waivers weren’t enough, yesterday afternoon Robert Brook suggested that the individual mandate, the part of the law that says each and every one of us has to have insurance or pay a fine, is the next to go as a matter of simple logic. His point is by delaying the employer mandate and going on the honor system with respect to the exchanges you have eliminated any way to verify whether someone is or isn’t insured.

Indeed, the administration has already gone even further with last Friday’s “honor system” regulation. States and exchanges “may accept the applicant’s attestation regarding enrollment in an eligible employer-sponsored plan…without further verification.” In other words, they aren’t going to collect the information necessary to verify anyone’s eligibility – both for access to exchange coverage, and for the subsidies that will often go along with it – so they’ll just take the applicant’s word for it. (The regulation also applies the same “attestation” concept to age, citizenship, immigration status, income, or any other “factor of eligibility for which the electronic data source is unavailable.” Since determining eligibility for exchange coverage requires the same information as determining whether one owes the individual mandate penalty, that will have to be on the “honor system” as well.

For the time being at least,  Obamacare  is a shadow of the plan which was approved by Congress and presented to the American public. It’s essentially devolved into a collection of insurance exchanges with premium subsidies not subject to any sort of oversight. The changes instituted by the administration have eliminated major sources of revenue intended to help finance the plan and opened a door to costly fraud. But it will be easier to implement.

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About Tom Lindmark 401 Articles

I’m not sure that credentials mean much when it comes to writing about things but people seem to want to see them, so briefly here are mine. I have an undergraduate degree in economics from an undistinguished Midwestern university and masters in international business from an equally undistinguished Southwestern University. I spent a number of years working for large banks lending to lots of different industries. For the past few years, I’ve been engaged in real estate finance – primarily for commercial projects. Like a lot of other finance guys, I’m looking for a job at this point in time.

Given all of that, I suggest that you take what I write with the appropriate grain of salt. I try and figure out what’s behind the news but suspect that I’m often delusional. Nevertheless, I keep throwing things out there and occasionally it sticks. I do read the comments that readers leave and to the extent I can reply to them. I also reply to all emails so feel free to contact me if you want to discuss something at more length. Oh, I also have a very thick skin, so if you disagree feel free to say so.

Enjoy what I write and let me know when I’m off base – I probably won’t agree with you but don’t be shy.

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