Obamacare Begins To Derail

Although the major provisions of the Affordable Care Act won’t take effect until next year, the first cars are already beginning to derail in this legislative train wreck.

Unions, for example, are starting to realize what many employers have seen coming since the law passed: The legislation will drive up the cost of health insurance, rather than drive it down. Though labor groups enthusiastically backed the Affordable Care Act at the time, the reality of rising costs has driven them to press the Obama administration for government subsidies to union workers. Such subsidies, which the law never envisioned for the employees of small, unionized employers who provide insurance, would drive up the cost of the law.

The unions are belatedly recognizing that without the subsidies, employers will either drop their insurance altogether as costs rise or risk losing business to non-unionized competitors with lower overhead.

The Obama administration thus far has declined to provide the subsidies, but it risks alienating a key Democratic ally if it holds firm. And the unions are unlikely to back down. Union leaders point out that for workers, losing union-negotiated health insurance would undermine one of the central points of joining a union in the first place. (Of course, the central purpose of the new law was to make health insurance available to everyone, union or not, so the only thing unions can try to offer their members is better or cheaper coverage than the rest of us enjoy. Now they want the rest of us to subsidize this for them.)

Meanwhile, the Treasury has issued regulations applying the Affordable Care Act’s rules regarding affordability of workplace-provided insurance to only the cost of covering the employee’s health care, not to the cost of covering other family members. The Internal Revenue Service, meanwhile, has proposed a workaround to the fact that employers generally don’t know their employees’ total family income by suggesting an “affordability safe harbor.” This would only require employers to act on information they actually know, which is much more practical, but which means workers’ children and family members, who would not be eligible for subsidies, may be left without an option they can afford. The result, as the law’s advocates are finally realizing, is that families that do not qualify for programs like Medicaid may remain uncovered. So much for universal health coverage, unless we further expand government-paid programs like Medicaid and Medicare.

These problems are only the beginning. Since the law requires insurers to accept practically all applicants regardless of their health, sick people will always seek coverage, while healthy ones will often opt to do without the expense. This phenomenon of “adverse selection,” as actuaries call it, will simply drive insurance premiums still higher, leading even more people to choose to go without coverage and more employers to abandon it, even if doing so triggers penalties.

As I have written before, the law’s penalties for individuals who choose to go without coverage are effectively toothless. For many people it will just make good economic sense, at least in the short term, to risk the penalty.

Employers, like individuals, will face penalties under the new law for failing to provide coverage – but only employers with more than 50 full-time employees. We are already hearing of instances in which employers are limiting hiring or reducing employees’ hours to avoid the mandate. And even when employers decide to shoulder ever-rising insurance costs, those same employers will have less money for other forms of compensation. It’s a trade-off many employees are beginning to notice. Professor Nicole Huberfeld of the University of Kentucky told The New York Times, “Many Americans believe [health insurance] is something they get free. But employers pay lower wages because they provide insurance.”

The former director of the Congressional Budget Office, Peter R. Orszag, told Congress the same thing when it considered requiring employers to report insurance costs on employees’ W-2 forms. “The economic evidence is overwhelming, the theory is overwhelming, that when your firm pays for your health insurance, you pay through reduced take home pay,” he said.

As Americans prepare for the full force of the Affordable Care Act to take effect next year, many are only now beginning to realize how profoundly wrong the “affordable” part of the name will prove. Wishful thinking was enough to get the law passed in 2010, but it won’t change the reality when the law takes effect in 2014.

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About Larry M. Elkin 564 Articles

Affiliation: Palisades Hudson Financial Group

Larry M. Elkin, CPA, CFP®, has provided personal financial and tax counseling to a sophisticated client base since 1986. After six years with Arthur Andersen, where he was a senior manager for personal financial planning and family wealth planning, he founded his own firm in Hastings on Hudson, New York in 1992. That firm grew steadily and became the Palisades Hudson organization, which moved to Scarsdale, New York in 2002. The firm expanded to Fort Lauderdale, Florida, in 2005, and to Atlanta, Georgia, in 2008.

Larry received his B.A. in journalism from the University of Montana in 1978, and his M.B.A. in accounting from New York University in 1986. Larry was a reporter and editor for The Associated Press from 1978 to 1986. He covered government, business and legal affairs for the wire service, with assignments in Helena, Montana; Albany, New York; Washington, D.C.; and New York City’s federal courts in Brooklyn and Manhattan.

Larry established the organization’s investment advisory business, which now manages more than $800 million, in 1997. As president of Palisades Hudson, Larry maintains individual professional relationships with many of the firm’s clients, who reside in more than 25 states from Maine to California as well as in several foreign countries. He is the author of Financial Self-Defense for Unmarried Couples (Currency Doubleday, 1995), which was the first comprehensive financial planning guide for unmarried couples. He also is the editor and publisher of Sentinel, a quarterly newsletter on personal financial planning.

Larry has written many Sentinel articles, including several that anticipated future events. In “The Economic Case Against Tobacco Stocks” (February 1995), he forecast that litigation losses would eventually undermine cigarette manufacturers’ financial position. He concluded in “Is This the Beginning Of The End?” (May 1998) that there was a better-than-even chance that estate taxes would be repealed by 2010, three years before Congress enacted legislation to repeal the tax in 2010. In “IRS Takes A Shot At Split-Dollar Life” (June 1996), Larry predicted that the IRS would be able to treat split dollar arrangements as below-market loans, which came to pass with new rules issued by the Service in 2001 and 2002.

More recently, Larry has addressed the causes and consequences of the “Panic of 2008″ in his Sentinel articles. In “Have We Learned Our Lending Lesson At Last” (October 2007) and “Mortgage Lending Lessons Remain Unlearned” (October 2008), Larry questioned whether or not America has learned any lessons from the savings and loan crisis of the 1980s. In addition, he offered some practical changes that should have been made to amend the situation. In “Take Advantage Of The Panic Of 2008” (January 2009), Larry offered ways to capitalize on the wealth of opportunity that the panic presented.

Larry served as president of the Estate Planning Council of New York City, Inc., in 2005-2006. In 2009 the Council presented Larry with its first-ever Lifetime Achievement Award, citing his service to the organization and “his tireless efforts in promoting our industry by word and by personal example as a consummate estate planning professional.” He is regularly interviewed by national and regional publications, and has made nearly 100 radio and television appearances.

Visit: Palisades Hudson

22 Comments on Obamacare Begins To Derail

  1. It is going to be a real hoot if Obama has to shut down his affordable care plan because it cost to much and leaves to many people uninsured. It could happen because not a week goes by that we dont hear of new ways the plan is going to cost more. Adding all the newly legal illegals to the plan may be the straw that breaks the camels back

  2. I think people are missing the point of this Law. Obama knew that this law would dramatically raise the costs for people who currently have healthcare and knew it was going to put pressure on Companies to drop health coverage for their employees. Why else would the fine for doing so be 1/3 of the cost of providing the coverage in the first place? Why would he insist on covering illegal aliens?. You see, Mr. Obama isn’t interested in seeing healthcare provided by Companies operating in a free market, rather he would like to see his goal of Government run single payer healthcare. In order to get there you must first break the current system. You must first inflict as much pain and hardship as possible to break citizens from the concept of private insurance.

  3. The Unions pushed this as much as the Dem’s did, you own it now, so suffer with the consequences like everyone else, especially the people who didn’t want it at all!!

  4. Obama is nothing but an Over Educated Idiot! I see them all the time..They are Book Smart but have no Common Sense whatsoever.But it’s easy to spend tons of Money when none of it comes from Your Pocket…this Guy has never had a Real Job and has been baby sitted by John Q. Public His whole life…I say He’s an Idiot but He knows exactly what He’s doing and is doing so on purpose His whole Plan from Day One was to Bankrupt the United States and bring us into Third World Status. He’s well on His way to doing just that and most Americans are to Stupid to realize it!

  5. Requiring insurance to cover more people— what a joke! I am covered— I pay $541/month and have a $3000 deductible and some co-pays that are unlimited, so while Mr Obama and his crew say that “having” insurance will fix the problem. So have an accident and go to the emergency room—If I cannot pay the deductible the hospital will not be better off. Worse yet, if my accident is in December I am likely to have two deductibles to pay because it all starts over Jan. 1. Insurance companies are going to make out like bandits here because there payments are guaranteed. People, you need to realize that insurance is part of a COMPENSATION PACKAGE. You cannot get blood out of a turnip and no profit, no business so employers must contain costs to stay in business so if one part of compensation goes up another goes down. For those who supported this “magic bullet” for “fixing” the health care issue—you will get what the rest of us saw coming.

  6. In the long haul, it’s all about getting rid of more jobs to make our country a Third World Country. No One but, Obama wins on Obamacare with his entire strategy on Insurance to be used to destroy America. Just watch and see.

  7. I think we should get rid of the health insurance companies. Between my wife and I and our employers contributions we spend over $15,000 a year on health insurance and now the insurance companies come out with mandatory co-pays even if your double covered. We have to spend a mandatory $6000 out of pocket befiore they pay for 80/20. I have alot of health problem and have sat down and figured even with paying for prescriptions x-rays and doctor visits I still would spend less that $15,000 a year. Health insurance any more is a joke and thnese large corporations are in it for thier own pocket book. Get rid of them and give me that money and I’ll choose what doctor to see and what procedure to have done. I just think that all the people that are healthy paying into something that gives you nothing in return.

  8. You are exactly right. obama the destroyer.
    he’s on track to be a dictator.

    I guess when half the people in this country are idiots,
    there isn’t much left of America.

  9. Optimum words here “most Americans are too stupid to realize it”. Obama knows exactly what he’s doing. He is both book smart and common sense smart. Anyone who thinks he’s not is treading in dangerous waters. This plan will be executed exactly as he intends. Americans will be left with no alternative but to try to hang in with a system so out of reach cost wise and no option left because the private health insurance industry is destroyed. Possibly the leveling of the global playing field?? Are all Americans part of the priviledged 1% that he speaks of, even our nation’s poorest? Read “Obama’s America”, interesting concepts discussed in this book.

  10. You can blame Obama all day long but it is the media that is responsible for failing to investigate and provide cover for corrupt politicians. The majority of voters rely on what they hear and read from media outlets that only report what their preferred government sources approve. Corruption and scandal is only reported (and usually not factual or actual) if it is about those who do not support the current regime. So much for investigative journalism and accurate reporting for the people from more big greedy corporations except it isn’t oil this time.

  11. obamacare was created to be the catalyst for a single payer system. its working exactly how it was designed to work. all along the single payer system has been the goal.

  12. It is clear….if they need more money they will simply print it. Robbing the savings of taxpayers and marching forward toward “The New World Order”.

  13. folks, look at the facts :
    ppl in good companies will be laid off
    business owners will see profits destroyed
    most ppl will have hours cut to 29
    unions want to be subsidized now
    upper middle families(mostly white ppl) wont qualify for medicaid or medicare
    extremely poor people(mostly minority) will qualify or be subsidized
    this is all being done to make income equality between whites and minorities
    this is a do-over for minorities to have a chance to be equal or rise above white people … class warfare …

  14. You can yap about Obama all day long. If you have a better solution that no one will whine about please post it now!

    Why don’t we turn our collective effort towards the insurance scum and pharmaceutical companies who are bleeding us dry. I don’t care how well thought out a health care plan is, it the scumbags keep pick pocketing us we all loose.

  15. The system we had before (i.e. private coverage for those who could afford it and help for those who couldn’t) was not perfect but it worked a lot better than Obamacare. Even the politicians who voted for it knew this, at the time they voted for it; otherwise, why would they exclude themselves from compliance and force it on the rest of us.

  16. The chickens come home to roost!
    Just 11% of our workforce is unionized. On average, they earn about 20% more than the average non-union worker. So why can’t they afford to “subsidize” themselves?

    The other 89% have to take what the marketplace is offering in pay, benefits, vacation, etc. Unlike many they have to pay a share for benefits, contribute to our retirement, savings, Health Savings Accounts, etc.
    No, the taxpayer should not be required to further subsidize a group of people who all ready get more than the majority. Too bad they didn’t figure that out before they so enthusiastically supported a plan they didn’t get to read cover-to-cover.

  17. In the last election Santa Clause won. Liberal progressives have their base trapped in dependency on government handouts. By destruction of manageable health insurance for the lower middle class, Obama will increase the number of dependents who have no health care choice but to find a way into government subsidized health care. This is just the way Obama significantly increased the number of citizens on government disability subsidies, using policies that discouraged job growth leaving the unemployed, and under employed whose benefits have run out, without a means of support. Since 2009, 8.5 million jobs have vanished, and 3.4 million jobs have appeared. We are now in a state where businesses cannot predict their employment costs and are therefore holding at the status quot or are in controlled shrinkage shedding more jobs. It’s the low end of the scale taking the hardest hit, and the worst is yet to come.

  18. Pass a bill that would require all of the senate and the house all federal employees to be covered by the same health care law as us poor folk.Including the white house and all of its cabinet appointees.Let us see if any of them then think that this is such a good thing.Bet you will never see these self appointed elitist do this to themselves.AMERICA HAS TRUELY BECOME A NATION OF SHEEP. TERM LIMITS, TERM LIMITS,TERM LIMITS.Time to revive the minute man.

  19. We are a Union family (working in the private sector) and yes we have been lucky to have health care, but there seems to be a misconception that Union workers don’t pay for thier health insurance.Our deductable is 3000.00 and we pay 20% of each bill plus we pay a monthly fee to our employer that continues to increase every year. We also have to pay dues of 160.00 each month to the Union in which they contributepart of that money to a political party we would never support and have no choice to opt out.

    You are a bit miss informed about benefits. I am not sure were you got your information about benefits but.. your wrong about a couple of things. As I already pointed out your way off base on the insurance issue. Let me clear up a few other issues I have with you.

    Most of the union workers in my shop sopport the GOP. Our retirement benefits are not fully funded by my employer and my Health Saving Account is all my own money.

    Yes, I make good money, but I work nights, day, weekends and holidays. My children rarely celebrated Christmas on Christmas and I can’t remembet the last time I had Thanksgiving dinner with my family. I have missed weddings, birthdays, my childrens proms and important moments in life because I work a swing shift. My job is dangerous and I am responiable for people’s safety everyday. THAT IS WHY I MAKE MORE MONEY THAN A USED CAR SALES MAN.

    SO, back to your comment, I have not asked for any kind of special treatment,
    please do not assume that all union workers expect some kind of deal. I do not, nor do I believe anyone should have a break. What is good for one is good for all. We are in the mess together like it or not so please to not put all the chicken’s in the same coop. I think you would be surprised to find, not all union members voted for Obama. Most of the rotten egg’s are not the working Union people, but thier leaders.

  20. Somebody like Chuck Norris needs to just Round-house drop kick this bastard in the face and out of office. He does not need to be in America nor his democratic liberal hypocrites. Imagine the layoffs and unemployment rate after this hits us in 2014!! His plan is to ruin America, he does not care about the economy, all he does is talk and keep idiots hopeful. He shuts them up by giving them “free” things. So of course he’s going to get votes.

    Only a matter of time.

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