Sunday, May 23, 2010

Goodbye, Employer-Sponsored Insurance, Companies are discovering that it's cheaper to pay fines to the government than to cover workers.

Good analysis of the ObamaCare debacle. The article includes a discussion of the effect of the bill on the availability of doctors. It is obvious that health care, because of "unintended consequences", will have to be rationed.

Businesses will do everything they can to survive, save jobs for their employees and benefit their investors. The only way to do that may be to "dump" their employees into the government created exchange.

Even if health plans in the exchange are identical to health plans at work, the subsidies available can only be described as bizarre. In general, the more you make, the greater the subsidy at work and the lower the subsidy in the exchange. People earning more than $100,000 get no subsidy in the exchange. But employer premiums avoid federal and state income taxes as well as payroll taxes, which means government is paying almost half the cost of the insurance. That implies that the best way to maximize employee subsidies is to completely reorganize the economic structure of firms.

Take a hotel with maids, waitresses, busboys and custodians all earning $10 or $15 an hour. These employees can qualify for completely free Medicaid coverage or highly subsidized insurance in the exchange.

So the ideal arrangement is for the hotel to fire the lower-paid employees—simply cutting their plans is not an option since federal law requires nondiscrimination in offering health benefits—and contract for their labor from firms that employ them but pay fines instead of providing health insurance. The hotel could then provide health insurance for all the remaining, higher-paid employees.

Ultimately, we could see a complete restructuring of American industry, with firms dissolving and emerging based on government subsidies.
Read WSJ article here.

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