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June 21, 2013

An ObamaCare Secret You May Not Know About

For me, there are plenty of regulations in ObamaCare to criticize, but this one clearly takes the cake!

The mission of ObamaCare is provide every American with affordable health insurance.  Many people believed that the program was solely targeting the large number of uninsured Americans.  The fact of the matter is that ObamaCare is essentially trying to be a price control for working Americans as well.  If you employ more than 50 full time employees or work for a company that does, you might want to continue reading.

ObamaCare has placed a cap on worker contributions to health insurance plans at 9.5% of their W-2 wages.  If this cost exceeds that amount, the employer either has to pay a larger portion of the coverage or pay a fine per employee.  Essentially, ObamaCare is passing cost onto the employer.  This has several negative consequences:

1) Fewer full time jobs.  As long as an employee works less than 30 hours per week on a consistent basis, providing coverage for them under ObamaCare is not required.  The downside, businesses are more likely to hire part-time help instead of full-time in favor of the cost benefits.  If you're unemployed and looking for work, this is obviously bad news for you.

2) Customers face higher prices.  Companies that cannot avoid the costs of ObamaCare are going to have to adjust prices.  No responsible company is simply going to close its doors or accept higher costs without increasing revenue to cope with ObamaCare.  Organizations that consume raw materials and sell finished products are going to get squeezed twice as hard (higher input costs along with higher labor costs).  It will be interesting to see the inflation statistics in the US come late fall/early winter.

3) Unemployment may rise. Organizations that have high fixed overhead may find the need to reduce employment in order to combat costs.  Again, this is not good for the labor force.

Finally, by reviewing the BLS report on Employer Costs, we know that private industry employers pay for health benefits at a cost of 7.8% of compensation.  This indicator may be the best way to determine the impact of the regulation in the future.

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