Monday, October 1, 2012

Unintended Consequences of Obama Care

The choice between providing health insurance or paying a fine for employers will have unintended consequences. One of these is that older workers will get passed up for jobs over younger workers. The reason for this is that companies are in business to make profits. When you compare the health insurance cost of a younger person with that of an older person, then you will easily see a huge difference in premiums. As an employer, given the choice of hiring someone young with significantly lower health insurance costs as opposed to hiring an older worker with very high health insurance costs, the choice is easy. The employer will hire the younger workers.

Once this activity begins happening over and over again, then you will probably see lawyers jump into the fray with lawsuits claiming age discrimination. Obama Care really puts employers in a total quandary. These employers will have to make the choice of hiring a younger worker to keep more profits over the risk of not hiring the older worker and lawsuits that will surely follow.

Some employers will just pay the fine and let employees fend for themselves. Once several companies start doing this, then they will all fall in line and do the same. The fine, early on, will be significantly lower than the cost of health insurance. What will happen down the road is that the government will have to raise the fine to match the price of health insurance and index it for age and inflation. I believe that this will cause less people to be hired in the future. If an employer knows it is going to cost him plenty to hire a new employee, then they have to know that the new employee will more than offset the cost. Jobs will become harder and harder to obtain. Even harder than they are now, if you can believe that. I think this will make the unemployment rate artificially high for the future. I doubt that we will see full employment again ever unless Obama Care is repealed.

Another unintended consequence of Obama Care is that some employers will just give everyone a cash payment so they can buy their own health insurance. In order not to discriminate, they will give every employee the same cash payment. Herein lies the problem. If they give the same cash payment to every employee, both young and old, then the older workers will again get the short end of the stick. The distribution of an equal cash payment, which would be taxable by the way, would also cause the potential of age discrimination lawsuits. Attorneys would jump on this as age discrimination.

Employers are in a tough spot in regard to cash payments. What if the employer does decide to give some kind of graded scale cash payment to employees based on age? Is this going to be bracketed? If so, then what age brackets are appropriate? What precedent is there for a graded scale cash payment? How much should each age bracket receive as a cash payment? What if the employer decides on a graded scale cash payment, but because of the rising costs of health care and health insurance, it is simply not enough. Will older employees decide to sue for underpayment?

All of these are tough questions for employers who will soon have to deal with these issues. If you are an employer, you had better hire an attorney to help you make these decisions in regard to paying your employees a cash payment. Otherwise, you will risk age discrimination lawsuits.

Another unintended consequence of Obama Care is that people who are going to be hit with the individual mandate will likely not file their taxes on time. There will be droves and droves of people who put off filing their taxes, because they do not want to pay the individual mandate fine. In addition, they may delay filing their taxes at all for a year or more. People do this now without Obama Care. We cannot be naive enough to think that people will suddenly become obedient and file their tax returns, knowing they will be fined.

Consider a younger person in their late 20's that is a landscape assistant for a small employer. They have to buy their own health insurance, because of Obama Care, but fail to do so. They thought they could pay the fine at the tax return filing deadline, but they fail to do so because they lost their job. They are not going to take any savings that they need to survive the job loss and give it to the IRS to pay for the individual mandate or buy health insurance with it for that matter. They will wait until they are in a better position to buy health insurance and file their taxes later. These people will eventually have to pay, but with added penalties and interest from the IRS. This scenario will without a doubt hurt the middle class, which is another unintended consequence of Obama Care.

American employers have always focused on making profits. I do not believe that will ever change, because if they do not make profits, then they are out of business. What will they do? They will seek out loopholes or work arounds. They will look for possible solutions to these issues. I doubt that they will fall in line and comply.

I would be really surprised if the Obama Care in place today survives five years from now. The employers and employees of America will get out their pitch forks and demand change. This is the Hope and Change that we need.

Do not forget to vote!