Archive for the ‘Free markets’ Category

How Obamacare Prevents Job Growth

Friday, June 1st, 2012


The jobs report that came out today showed that only 69,000 new jobs were created in May.  (Of those, 5 were created by HSA for America.)  But more importantly, this was a dismal gain in overall employment, resulting in a rise in the official unemployment rate to 8.2 percent.  One of the underlying reasons for high unemployment is the economic burden caused by the health care reform law known as Obamacare.



Under this law there is a $2000 tax per worker for employers with over 50 employees, who do not provide approved health insurance coverage starting in 2014.  They get an exemption on the tax for the first 30 workers, but not on the next 20.  So a company with 49 employees that is considering hiring one more full time worker, could face a $40,000 tax for doing so.  There is no penalty for not providing coverage to part-time workers.


If the employer does offer insurance, but the premiums exceed 9.5 percent of the employees income, the employer faces a penalty of $3000 per worker who gets coverage through the exchange.  That’s a $3000 government incentive not to hire that worker.


Of course, employers who do provide insurance coverage are also facing rising costs.  Obamacare mandated many coverage benefits that have increased costs, and will further increase costs starting in 2014.  Already in effect are mandatory preventive benefits, mandatory maternity coverage, price controls which raise costs on younger people, and more.  Changes that take effect in 2014 will further increase costs, leaving employers facing higher expenses for every person they employ.


Many larger companies have calculated the costs of complying with Obamacare, and the results are staggering.  John Deere and Caterpillar, two Illinois-based heavy equipment manufacturers, have each stated that that complying with the law will cost these companies over $100 million each.


Businesses hire employees when they expect the income generated by that employee to exceed the cost of hiring the worker.  When the cost of hiring goes up, the number of hires goes down.


Why Health Insurance is Typically Provided by Employers

Thursday, May 3rd, 2012


Have you ever wondered why health insurance is purchased by the employer?  Our car insurance or homeowner’s insurance isn’t provided by employers. Employer-provided health insurance often traps people in jobs they don’t want, because if they leave the job they are not allowed to take their coverage with them.


The reason we purchase health insurance through employers is that it is much cheaper for the employer to pay for it than the individual, since the employer gets a tax deduction on the purchase of health insurance.  If an individual purchases health insurance, they are still paying taxes on that money.


This obviously can make a huge difference in how expensive the coverage is to buy.


Let’s look at how this came to be.    During World War II, there were price and wage freezes were put in place.  Since employers could not legally use higher wages to attract better employees, they found a loophole and started offering benefits, such as health insurance, that were tax-free.


Unfortunately, most people today have several different jobs and even different careers, throughout their lifetime.  This means that their employer-sponsored health insurance is always temporary coverage, going away whenever they leave that employer.


One important fix to the system is to make sure health insurance has the same tax implications, whether it is purchased by an individual or an employer.  More individuals would be able to afford coverage, and more people would have permanent coverage that would not be affected by changes in employment.


Free Markets and Healthcare Costs

Tuesday, April 17th, 2012


There is confusion among many who believe that more government involvement in healthcare will lower costs.  Even when they purport to believe in a free-market economy, they claim that somehow healthcare is “different”.


It is different than… computers, automobiles, televisions, and so many other consumer goods that have dramatically dropped in price and improved in quality over the past several years.  But why is that?


Simple – government involvement and interference in the market.  As government involvement has grown, costs have risen.



Here’s a simple, obvious example.  Prescription drugs, which are highly regulated, compared to over-the-counter drugs where a much freer market with much less government involvement exists.


The average cost to get a prescription drug approved by the FDA: $403 million (in 2002).  The average length of time for drug approval: 8.5 years.  Not exactly an enticing business arena for most entrepreneurs.