How Obamacare Puts Businesses Out Of Business
As I've been saying for years -- as a person who has bought her own healthcare for decades, without an employer -- is that healthcare should be untied from the workplace.
Now, unfortunately, it is more tied than ever to the workplace, thanks to Obamacare. At The Daily Signal, Melissa Quinn writes of how it would have affected a deli owner's business. (He's now closing his doors -- in part because of Obamacare, he says.)
When Loventhal learned he would be faced with the added expense of providing his more than 50 employees with health insurance come Jan. 1--he estimated it would cost between $70,000 and $100,000 annually--Loventhal decided to close Noshville's doors before the provision of Obamacare overseeing businesses, the employer mandate, goes fully into effect."It's an onerous bill, and for a small business, it's a lot of time [to comply]," he said. "I've been studying this for three years, and I really couldn't come up with a good answer, and I feel sorry for closing this business."
Under Obamacare's employer mandate, businesses with more than 50 employees working more than 30 hours per week will be required to provide health insurance to its workers.
On Jan. 1, 2015, the employer mandate went into effect for businesses with more than 100 employees, and on Jan. 1, 2016, those rules will apply for those with more than 50 employees.
So far, the effects of the law differ according to who one talks to: President Obama and congressional Democrats argue Obamacare has caused the uninsured rate to drop to unprecedented levels. Republicans, meanwhile, say Americans are facing higher premiums and deductibles because of the law, and businesses are grappling with how to abide by its costly mandates.
Higher premiums and deductibles here.
I still have health insurance; I just can't afford to use it.
What kind of businesses are affected?
A 55-person law firm, for example, may not feel the effects of the law too strongly, particularly if the cost of health care goes up for its employees. By contrast, businesses like a restaurant with lower-wage workers and smaller margins would be impacted more."It's a significant increase in the business' labor cost, and that may have an adverse affect on the economics and profitability of the business," Haislmaier said.
ObamaCare and the minimum wage have similar job killing effects.
The production of an employee is what he adds to the sales of a company, which pays for his salary and benefits. The company is a way to take the employee's specialized contribution, add it to the products produced, sell those products, and then pay the employee in cash and benefits from product sales.
The first effect of a minimum wage is to raise the price of products. In effect, it is the customers who are pressured to pay more to support the higher wages. If the customers will not pay enough, then profits will decline and businesses will shrink or fail. People will not be employed for long when their personal contribution is not enough to support their pay.
ObamaCare applies pressure similar to a minimum wage because it requires a minimum benefit or cost, depending on the detailed rules. ObamaCare demands a benefit of about $12,000 - $20,000 per full time worker, depending on family size, or about $3,000 as a tax penalty for a part-time worker who is not provided a medical plan. The public thinks that it is the employer which pays for employment benefits and taxes. Actually, all costs of employment (employment taxes, benefits, and cash salary) are paid out of the production of the employee, or the employee loses his job.
A full-time employee must be able to pay for his $12K-$20K benefit. Restated, he must be productive enough to pay for his ObamaCare insurance and have enough left over to provide him with a sufficient cash income. If his production is low, he can't afford to work full-time, or equivalently, the employer cannot afford to offer him full-time work.
An employee might be able to exist on part-time work, less than 30 hours/week. He may afford the $3,000 tax penalty, hidden from him, paid by his employer, and resulting in a lower cash salary. He will then pay for his own insurance from the government website with possible subsidies.
If an employee was part-time and remains part-time, then he will see his salary fall by about $3,000 for the amount his employer must pay in tax penalties, and he will have to pay personal tax penalties if he can't afford personal health insurance. He may find that he has more income by going on welfare with almost free insurance, and avoiding the personal health care tax penalty.
ObamaCare is pushing full-time workers to part-time, and part-time workers to welfare. This produces a large loss of cash income from fewer hours worked and the cost of health care plans and penalties.
One might think "Let's require companies to provide the same health benefits to everyone. Remove the separate treatment of part-time work." That separate treatment is the respect that ideology gives to reality. If all employees had to receive (buy) full health benefits from employers, then many more people would be fired. There isn't enough production available for lower paid employees to purchase the insurance that the government thinks is proper.
Just like the minimum wage, the government wants all employees to be paid more without producing more. A law cannot magically create resources. Almost everyone would do better without government meddling in employment and health insurance.
Andrew_M_Garland at December 20, 2015 6:00 AM
Under Obamacare's employer mandate, businesses with more than 50 employees working more than 30 hours per week will be required to provide health insurance to its workers.
There's the deli's solution: hire more employees, but keep everyone under 30 hours per week. You're welcome.
I R A Darth Aggie at December 20, 2015 6:28 AM
Yep see that happening with my niece and her group. Early 20's, working part time at places limiting hours to 26 to make sure not over 30,so no benefits. Most have 2 part time jobs. hard to make a jump up since as part of this new economy many places have gotten rid of training programs and this is a group that would have really benefitted from some noncollege prep vocational ed classes in high school which also have pretty much disappeared. Noticed a number of them have gotten sucked into the barely accredited worthless tech schools so they have limited,skills. Worthless training and a mound of student loan debt. Oh and her Obama care insurance.. practically useless for anything beyond basic care... good luck finding a d er dermatologist
quika at December 20, 2015 6:50 AM
But I R A, they have employees they have had for years, and they weren't willing to just fire them all and hire new ones. Also, I'm no accountant, but I'm guessing people bring lawsuits for that, and maybe it's against some government regulation.
Amy Alkon at December 20, 2015 6:50 AM
Yeah, because the resulting additional paperwork and supervision won't be a burden at all.
Conan the Grammarian at December 20, 2015 9:37 AM
IRA, that sounds like what has happened. As Amy points out firing and rehiring part time is rife with lawsuit opportunities. The sensible solution is to close the business. Wait a year. Reopen with a new staff of part time workers.
Or go into a different business entirely.
Ben at December 20, 2015 10:46 AM
The dumbest thing an American can do is hire an employee.
Meanwhile. Cheers to Andrew above, still the best content/syllable contributor here.
More about minimum wage...
Why and how the liars in office had no intention of treating you...
Radwaste at December 20, 2015 12:23 PM
You don't have to fire them.
"You go to part time, quit, or we go out of business, your choice."
At which point, I'll guess it'll be "Ok, well, out of business it is then."
Tho this is Tennessee:
Emphasis mine. Fire 'em all, let G*d sort 'em out.
I R A Darth Aggie at December 20, 2015 4:19 PM
Even in a right to work state it is easier to avoid the lawsuits by just closing shop for a while. Even if you would have won the lawsuit in the end, fighting it costs money and time.
Ben at December 20, 2015 8:23 PM
Then there's the fact that all of this motivates hiring illegal immigrants. A business can, quasi-legally, get away with paying illegals less than minimum wage, with little or no benefits (which are covered by means of the illegals receiving welfare). Thus there's a huge and powerful coalition for illegal immigration: crony capitalists, who see a source of cheap labor; government bureaucrats, who see a locked-in political bloc supporting bigger government, and the Left, which sees mass importation of Third World cultures as a way of destroying Western culture. This is what the American citizen is up against.
Cousin Dave at December 21, 2015 7:25 AM
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