Obama’s Blame Shifting and Stunning Declaration

During his astounding press conference President Obama was asked if he was confident that insurance companies and the State officials who regulate them would respond positively to his announcement that, in spite of the prohibition in the Affordable Care Act (ObamaCare) he would allow millions of recently cancelled health insurance policies to be reinstated for one more year.  His answer in part:

Traditionally state insurance commissioners make decisions about what plans can be or cannot be sold, how they interact with insurers. What we’re essentially saying is the Affordable Care Act is not going to be the factor in what happens with folks in the individual market.

[...]

I think there’s going to be some state-by-state evaluation on how this is handled.  But the key point is, is that it allows us to be able to say to the folks who’ve received these notices, look, you know, I, the president of the United States, and the insurance model of the Affordable Care Act is not going to be getting in the way of you shopping in the individual market that you used to have. [emphasis added]

So the message is, indeed in Obama’s words, “the key point is” that if you received notice that – in compliance with his law – your health plan was to be cancelled, don’t blame the law or the President who promised that if you liked your insurance you could keep it!  Suddenly, the requirement that your policy must be cancelled has been suspended – for one year!   Thus you should blame the insurance company and the insurance regulators in your state.

But wait!  This isn’t the only jaw-dropper from the If-you-like-your-insurance-maybe-you-can-decancel-your-insurance press conference. 

What we’re discovering is that part of the problem has been technology, hardware and software, and that’s being upgraded. But even if we get the — the hardware and software working exactly the way it’s supposed to with relatively minor glitches, what we’re also discovering is that insurance is complicated to buy. [emphasis added]

This is an utterly astounding admission!  Since the beginning of his first Presidential campaign six years ago this man has sold himself as a world class authority on health insurance and health care.  He was The One who could cover all the uninsured and give everyone else “better” coverage at lower cost.  For months he’s been bragging that “clicking around” on his website would make getting insured as easy as buying a plane ticket from Kyak or a TV from Amazon!  Now he says that only since launching the website 45 days has he “discovered” that buying insurance is complicated!

A Big Lie and A Little Apology

President Obama emphatically promised “If you like your health insurance you can keep your health insurance” over and over because he knew, from recent history, that the truth would be fatal to his health care legislation.

The media herd stampeded breathlessly Thursday night to news that President Obama had “apologized” to the millions whose health insurance has been or soon will be cancelled as required by ObamaCare.  Here are the more coherent excerpts from the President’s long-winded, word salad answer to a question from NBC News’ Chuck Todd’ regarding his if-you-like-your-insurance-you-can-keep-it promise:

We are proud of the consumer protections we’ve put in place, on the other hand we also want to make sure that nobody is put in a position where their [health insurance] plan has been cancelled and they can’t afford a better plan even though they’d like to have a better plan so we’re going to have to work hard to make sure those folks are, you know, taken care of.

[...]

Even though its a small percentage of folks who may be disadvantaged, you know, it means a lot to them and it’s scary to them.  Uh. And I am sorry that they, uh, you know, are finding themselves in this situation based on assurances they got from me.

So, Obama came up a bit short of a clear, direct apology for his earnestly assuring us of what he knew was not true, some thirty times in televised speeches.

For context that explains why “these folks” are  “finding themselves this situation” let’s review history.

HillaryCare was the nickname given to President Clinton’s 1993 health care proposal after it lost traction in Congress and the First Lady tried to revive it.  Opponents had provoked massive opposition all across the country with TV ads featuring “Harry and Louise,” a middle-class couple suffering anxiety and despair because the health plan they liked would be taken away and replaced with a plan “designed by government bureaucrats.”

Harry Louise ads exploited our natural human resistance to change.  People are always reluctant to abandon a known and understood status quo for a future circumstance that they can’t fully understand until they experience it.  We Americans are especially hostile to change being forced upon us by arbitrary government or bureaucratic edict.

When President Obama decided to dust off the old, progressive dream of “universal health care” he knew it was vulnerable to the same attack that had killed HillaryCare because:

  • Roughly 85% of Americans already had health insurance, and most were satisfied with it.
  • Except for true believers on the far left, there was no demand for government to take control.

Due to these truths his sales strategy all but created itself.   His health insurance plan could not possibly pass Congress unless he prevented mass resistance by emphatically assuring the eighty five percent that:

If you like your health care plan, you’ll be able to keep your health care plan, period.  No one will take it away, no matter what.

The purpose of these words was never to describe the the written law that we now call ObamaCare.  We know this because he started if-you-like-it-you-can-keep-it during his 2008 campaign before the first word of the law was written, before he knew what sort of legislation could actually pass Congress.  He continued this promise throughout 2009 as the actual language of the law was continuously changing through the legislative process to reflect various political agreements and tradeoffs.

Ultimately the law squeaked through Congress, passing the House of Representatives by only four votes, with all 178 Republicans and 34 Democrats voting no.  If Members had been pressured by 200 million people who objected to being forced into different, more costly insurance, ObamaCare would have been sent to the same place as HillaryCare, the ash heap of history.

Obama continued to make the you-can-keep-it promise after the law was enacted because to admit that it was not true would be to put his 2012 reelection at risk.

While the President has so far acknowledged only that most customers in the individual insurance market have lost or will lose their insurance, a much larger group, tens of millions who now have employer provided insurance will face the same fate in 2015.  Like the individual polices that are now being cancelled these group policies are also what Obama calls “sub par,” in that they don’t conform to commands in ObamaCare regulations. 

It now seems obvious that the President delayed the employer mandate until 2015 to prevent those millions of voters who are covered by employer group insurance from realizing what was happening to them until after the 2014 Congressional election.

Faulty Website is Only the First ObamaCare Crisis

Who brought the phrase “health Insurance death spiral” into the ObamaCare debate?  Was it Sarah Palin?  Rush Limbaugh?

While it may seem provocative or alarming in context of the current political climate, it’s actually a common term in the vocabulary of health insurance actuaries.

Insurance-death-spiral2The setup for a classic insurance death spiral is one of the most hyped features of ObamaCare, guaranteed issue.  This is the insurance industry label for offering health insurance with no health screening so that those with pre-existing conditions are automatically accepted.  A predictable response to guaranteed issue is the phenomenon the insurance industry calls “adverse selection,” the tendency of people who are already sick or believe they are at risk of needing medical services in the near future to buy health insurance, while those in good health tend to forgo the expense.

We exposed the President’s politically motivated deceptions regarding pre-existing conditions here.  Put bluntly, the only way an insurer can absorb the extra cost of guaranteed issue and not go broke is by collecting extra money from healthy people.

The death spiral begins if fewer healthy people than anticipated sign up and pay premiums.  The insurer loses money and must set premiums even higher, driving away even more healthy people.  Eventually, the premiums become so high that only those who need immediate, expensive, medical care will buy a policy and the company has no choice but to complete the death spiral by exiting the health insurance business.

After three weeks of website failure the President stepped up to the cameras to attempt to reassure America:

Little ObamaYou’ve probably heard that the new website where people can apply for health insurance and browse and buy affordable plans in most states, hasn’t worked as smoothly as it was supposed to work [but] the product of the Affordable Care Act…is quality health insurance that’s affordable. And that product is working. It’s really good…the health insurance that’s available to people, is working just fine. In some cases, actually, it’s exceeding expectations

It’s true that the website is not the insurance.  But it’s also true that when the ObamaCare website crisis has finally been resolved the next crisis will be a looming death spiral.  Some 50 million Americans are not covered by employer provided insurance or government programs.  In some states Medicaid eligibility criteria have been expanded to accept higher incomes so some of those uninsured will find a home in this program that provides free health care paid for by taxpayers. 

Those with pre-existing conditions who don’t qualify for Medicaid will be highly motivated to buy policies on the exchange.  But there are two strong, adverse selection incentives pushing back on the fundamental assumption that underpins ObamaCare, that nearly all young, healthy people will obey the individual mandate and purchase policies at prices high enough to cover the extra cost of guaranteed issue:

  1. The fine for not buying insurance isn’t nearly as much as the insurance for most people, and the law puts limits on the IRS’s ability to collect it, making it less than fully enforceable.
  2. The same guaranteed issue that enables people who are already sick today to make one monthly premium payment and then be “covered” is also an incentive for the young, healthy people who are supposed to get stuck with the cost to postpone buying their own insurance until such time as they need expensive medical services.

Why not “beat the system” by going without insurance until you need it?  After all, the President spent two years demonizing insurance companies for “discrimination against’ the uninsured, deliberately planting the perception in the mind of the public that those companies could easily cover pre-existing conditions but simply chose not to out of avarice.

Today, all the attention is focused on the dysfunctional website.  But fixing it will only accelerate the onset of worse troubles.

The Precarious ObamaCare Individual Mandate

The government shut down could have ended in only three days. It did not because the President desperately needs to reconcile his pre-ObamaCare demagoguery and deception with the unbending laws of math and economics.

The partial shut down began on October 1 because the Democrat Senate refused a demand from the Republican House that ObamaCare be entirely defunded so that all of it’s functions would cease to operate and none of its legal and regulatory requirements could be enforced.  error-page-on-monitor

But on October 3, the third day of the shutdown the House dramatically shrank its demand to a one year delay of only one element of ObmaCare, the individual mandate.  This is the requirement that every citizen without employer provided health insurance must buy a government approved health plan from a private sector insurance company.

But Senate Democrats refused to consider this scaled back demand, even after major failures in the online exchanges that are supposed to sell these policies.  Thus the shutdown continues.

The President has already delayed several other provisions of the ObamaCare law.  But he dares not delay the individual mandate because to do so would expose a fundamental deception at the foundation of the health care law. 

During his campaign to sell ObamaCare back in 2009 and 2010, one of the President’s most often asserted claims was:Yelling Obama 3

We’ll make sure insurance companies can not discriminate against people with pre-existing conditions!

The emotionally charged “discriminate against,”  the same phrase that describes the exclusion of ethnic minorities by malevolent bigots, was meant to provoke revulsion against insurance companies, who were the designated bad guys in Obama’s pitch for a government take-over of health insurance.  Beginning 1/1/14 it will be illegal for an insurance company to refuse to cover someone with a pre-existing condition, no matter how sick they are, or how much it will immediately cost to provide the medical services they need.

The insurance industry term for accepting all applicants for health insurance, without consideration of pre-existing conditions is “guaranteed issue.”  To a large extent guaranteed issue was already in effect before ObamaCare.  A 1996 federal law, the Health Insurance Portability and Accountability Act (HIPAA), requires employers to offer guaranteed issue to employees, and prohibits charging extra premiums for employees or their dependents who have pre-existing conditions. 

The rapid rise in the cost of employer-based group health insurance coincides with implementation of guaranteed issue requirements.

To sell ObamaCare the President repeatedly castigated insurance companies for turning away applications from people who were already sick because that was “just when they needed insurance the most.”  Well, yes, if you get sick that’s the moment when you need health/hospitalization insurance most.  You also need fire insurance most the day your house burns, and auto insurance the most on the day your car is wrecked.  But everyone understands that if you didn’t sign up and start paying for insurance before the fire or the wreck you won’t be compensated.

However, Barack Obama has apparently convinced millions of people that government can command health insurance to work in reverse, to begin “covering” people after they get sick, before they buy a policy.  To “cover” and pay the expenses of people who are already sick is to add a costly,  non-insurance function to health insurance.  Guaranteed issue is in reality a government required, private sector, safety net financed by significantly higher insurance premiums paid by all policy holders.

Obama and the Democrats’ theory is that this scheme will “work” because the huge, immediate cost to insurance companies will be offset by millions of new healthy, young insurance customers who will obey the individual mandate to sign up for health insurance and  pay the premiums but will cost the insurance companies little or nothing because they will need little or no medical attention for many years.  Thus, the theory goes, the insurance companies will be able to afford the new customers with pre-existing conditions without significant premium increases.

But if the individual mandate is delayed, if young healthy people are not commanded to buy policies, the scheme implodes.  And, the President’s most compelling promise, that his government is so clever it can care for previously uninsured people with pre-existing conditions – without noticeable cost to anyone – implodes with it.

Even if the individual mandate is not delayed there are two strong disincentives pushing back on the never tested ObamaCare theory.  First, the fine for not buying insurance isn’t nearly as much as the insurance.  Second, guaranteed issue means we can all skip buying insurance until we get sick.  In other words, we need car insurance before we have a wreck, even if we never have a wreck.  But because of government intervention we don’t need health insurance until after we get sick!

Our next post deals with the likely result of these disincentives.

Grim Lessons in Unintended Consequences

My-unintended-consequencesObamaCare must be stopped.  It’s an unacceptable assault on liberty and it’s an extreme example of the inevitable result of government applying force against The People to achieve the Utopian visions of the elite: Unintended Consequences.

The government’s 2013 fiscal year ends September 30 and once again, Congress has been unable or unwilling to pass normal appropriations bills that would authorize spending in the next fiscal year.  Both the House and the Senate must pass a Continuing Resolution (CR) a device that authorizes spending in fiscal 2014 roughly the same amount that was spent in fiscal 2013.  If a CR is not enacted by October 1 parts of the government will “shut down” until both Houses pass and the President signs a CR.

On Friday the House passed a CR that funds the entire government except for Obamacare.  Harry Reid, leader of the Democrat controlled Senate stomped his foot and announced that he had more than enough votes to amend the CR, adding ObamaCare funding back in, and bounce it back to the House, where it would have to pass in amended form to avoid a government shut down.

The media herd stampeded to attack House Republicans, calling them dangerous, stupid and insane for attempting to block implementation of ObamaCare.  Some Republicans who disagree with the de-funding strategy scorned Conservative/Tea Party Republicans for risking a government shut down over a fight that could not be won.  The political media establishment is obsessed with legislative strategy rather than the merits of de-funding ObamaCare

Government  bureaucracies compile lots of statistics.  They count the employed, the unemployed, the rich and the poor.  Bureaucrats divide us into gender, and ethnic identities and count the populations of each.  Politicians are most enthusiastic about counting real and alleged beneficiaries of their big government schemes. 

While there are always unintended and unanticipated negative consequences when the government intervenes, forcing itself into the private economy, they are usually not widely reported or readily quantifiable.  Politicians and the bureaucrats who work for them systematically avoid reporting negative consequences, or unanticipated harm suffered as a result of social engineering programs enacted by Congress.  There’s a Bureau of Economic Analysis and a Bureau of Labor Statistics, but no Bureau of Harmful Consequences. If there were such a bureau it would be busy these days tallying up the damage from ObamaCare.  Here are just a few of scores of recently disclosed examples:

  • We’re told of millions of young adults who are now covered by their parents’ insurance until age 26 but we are not told what that extra coverage has cost or who has had to pay for it, directly or indirectly. Of course it will be paid for by employers who will have to offset the cost by charging employees more for their health care or paying lower salaries or charging customers higher prices.
  • All across the country hundreds of employers have announced plans to lay off employees or to reduce employees to  fewer than 30 hours per week to avoid ObamaCare insurance mandates they cannot afford.
  • Home Depot announced it will end medical coverage for its 20,000 part time employees because the inexpensive policy it has offered is not permitted under ObamaCare regulations.  The employees will be required by federal law to buy a government approved plan from the ObamaCare exchange which in most cases will cost them more than the portion of the Home Depot policy they now pay.
  • The Cleavland Clinic, a world class medical center lauded by President Obama in 2009 as an example of excellence, announced that it will suffer a $330 million annual revenue loss due to ObamaCare while the cost of treating patients will stay the same.   Therefore the Clinic will be forced to make staff reductions.
  • Kaiser Family Foundation reports that 31% of employees in small firms have policies with deductibles greater than $2,000 per year, which will be forbidden by ObamaCare beginning next year.  Thus health insurance premiums will have to rise for these millions of people and the small companies they work for.
  • Most large companies are self insured.  Instead of paying insurance premiums they pay for their employees’ medical expenses directly.  Beginning next year ObamaCare will impose a new “fee” on self insured employers, based on the number of employees and dependents they insure.  Delta Airlines reports that its fee will add up to more than $10 million per year.  Of course these dollars will buy nothing for the Delta employees whose labor produced them.  Delta could recapture the $10 million by increasing the amount employees pay for their insurance which would make the fee is a hidden employment tax.   Or, if Delta is able to pass this additional cost on to its customers, it’s a tax on airline passengers.

Sometimes negative consequences of government schemes are not unintended.  They’re intentional, but undisclosed.  Remember when Speaker Nancy Pelosi said they would have to “pass the bill so we can find out what’s in the bill”? 

ObamaCare supporters keep telling us their law forces insurance companies to provide “free” stuff.  It’s true that new regulations will require a range of services without any copay or deductible.  But the only way these services could be free is if the doctors and staff who provide them worked for nothing. 

To stay in business Insurance companies must collect more money from customers than they pay out for medical services.  So, the only way to fund free” services is to charge higher premiums!  DUH!  Here are some examples from recent news reports.

  • The Florida Office of Insurance Regulation just issued a report on all eleven insurance compares that will be offering policies in the Florida exchange, comparing the cost of their current individual policies with the the cost of their new ObamaCare compliant policies. The increases average 35%, with the highest at 55%.
  • The Ohio Department of Insurance announced that individual consumers buying ObamaCare-compliant health insurance on the federal government’s health insurance exchange for Ohio will pay an average of 41 percent more than they did in 2013.
  • Maryland’s largest health insurer predicts a 25% increase.
  • In New Jersey a very popular low-cost health plan will no longer be offered. Approximately 106,000 policy holders will be required by federal law to switch to more expensive government approved plans.

Because there is no bureaucracy dedicated to collecting and reporting all the negative consequences ObamaCare supporters get away with dismissing these examples as isolated anecdotes.  They still insist ObamaCare will “save money and improve care in the long run.”  But as we get closer to the 2014 start date we can expect a tsunami of these “anecdotes.”

Headline Jobs Numbers Vs Real Life

Virtually all of the reduction in the official unemployment rate from the peak of 10% in 2009 to the current 7.3% is due to reclassifying jobless people from “unemployed” to “not in the labor force.”

The latest jobs report didn’t get much attention as the political-media establishment obsessed over Syria.  The day it was published The White House triumphantly posted several “key Points” on its website including:

Private sector employment has risen for 42 straight months, with business adding a total of 7.5 million jobs over that period.

We’re suppose to be impressed.  But 42 months of job growth is not unusual. There were 45 straight months of job growth from 2003 to 2007.  There was continuous job growth for 86 months in the nineties, 84 months in the eighties and 57 months in the seventies.  Since 1950 seventy seven percent of monthly jobs reports have shown increases.

What is unusual this time is the agonizingly slow pace of job growth. 8-recoveries-aug-13

The chart above tracks every post recession job market since 1950 the same way the Obama Administration tracks the current job market, starting at the first month of growth after a recessionary period of job losses.  We’re living through the weakest of all.

Another “key point” from the White House:

The overall unemployment rate ticked down 0.1 percentage point to 7.3 percent, the lowest since December 2008.

This is textbook spinning, to make bad news look like good news.  Most Americans (those who don’t live in the booming Washington D.C. region) do not understand how the government unemployment rate could have come down when so many around them are still jobless.

The statistic that explains this gap between the official unemployment rate and reality on Main Street is the Labor Force Participation Rate, defined as the percentage of working age adults “in the labor force.” To be included in the labor force one must either have a job or qualify to be counted as “unemployed” by continuously looking for work.

People who have been unemployed for a long time tend to become discouraged and spend less time on job search activities and thus don’t qualify by government criteria to be counted “unemployed.”  Labor Department statisticians reclassify them as “out of the labor force,” the same category as stay-at-home parents, retirees, and anyone else who doesn’t want a job. 

From July to August almost half a million jobless men and women were reclassified and are no longer counted as “unemployed.”  If they were still counted the August  unemployment rate would have gone up to 7.5% instead of down to 7.3%

The next chart, tracking the labor force participation rate since 1980, shows a shocking decline over the past five years as millions have been reclassified from unemployed to out of the labor force.

Arc-of-participation-Sep13If the labor force participation rate were the same today as it was when in 2009 when the unemployment rate hit 10$%, today’s unemployment rate would be 9.8%.

If the labor force participation rate were the same now as it was at the end of 2008, the current unemployment rate would be 11.2%

 

Obama Repudiates His Own Military Operation

“First of all, I didn’t set a red line.”superior-Obama

This was Barack Obama’s preposterous claim at his Wendesday press conference in Stockholm. He Continued:

The world set a red line. The world set a red line when governments representing 98% of the world’s population said the use of chemical weapons are [sic] abhorrent and passed a treaty forbidding their use, even when countries are engaged in war.

But President Obama did draw the red line, himself, on August 20, 2012.  The transcript is still here on the White House website.  NBC reporter Chuck Todd asked if The President “envisioned” deploying the US military to ensure safe keeping of Assad’s chemical weapons.  Obama’s answer:

I have, at this point, not ordered military engagement in the situation.  But the point that you made about chemical and biological weapons is critical.  That’s an issue that doesn’t just concern Syria; it concerns our close allies in the region, including Israel.  It concerns us.  We cannot have a situation where chemical or biological weapons are falling into the hands of the wrong people.

We have been very clear to the Assad regime, but also to other players on the ground, that a red line for us is we start seeing a whole bunch of chemical weapons moving around or being utilized.  That would change my calculus.  That would change my equation.

Mr. Todd followed up with,  “So you’re confident it’s somehow under – it’s safe?”

Obama responded:

In a situation this volatile, I wouldn’t say that I am absolutely confident.  What I’m saying is we’re monitoring that situation very carefully.  We have put together a range of contingency plans.  We have communicated in no uncertain terms with every player in the region that that’s a red line for us and that there would be enormous consequences if we start seeing movement on the chemical weapons front or the use of chemical weapons.  That would change my calculations significantly.

It’s simply not plausible that the President was speaking for “the world” rather than for himself and his Administration when he made these remarks a year ago.  He did not then nor does he now justify his current position that America alone has an obligation to enforce a treaty signed by 189 nations.   And the action he proposes falls short of enforcing the treaty, which requires the destruction of all chemical weapons.  He and Secretary Kerry say the goal is only to discourage Assad from using them again.

Fast forward again to the Wednesday press conference in Sweden.  Obama went on to claim:

My credibility is not on the line. The international community’s credibility is on the line.  America and Congress’s credibility is on the line, because we give lip-service to the notion that these international norms are important.

The reference to Congress supports the cynical view expressed by some Congressmen and pundits that the only reason Obama submitted a request to Congress for authorization to conduct his “limited” operation against Assad was to be able to deflect blame in the event of unanticipated catastrophe.

In the Syrian civil war and chemical weapons matter there is little in the way of reliable, undisputed information.  Speculators, some who speak with great confidence, proffer many possibilities:

  • The “limited” missile and bomb attack President Obama says he has planned and ready to launch will be ineffective, and Assad will emerge to be regarded in the Middle East as a hero who survived a battle with America.
  • The “limited” missile/bomb attack will work out exactly as the President and Secretary Kerry claim it will: Assad will be damaged and “degraded” and will never deploy chemical weapons again.
  • The missile/bomb attack will be so effective Assad’s regime is toppled, opening the way for a new regime will govern Syria.  If that happens there are at least two possibilities, depending on whose version of the situation turns out to be right:
    • The rebel forces who will prevail are wholly owned subsidiaries of Al Qaeda and the Iranian theocratic thugs, OR,
    • Some of the rebel forces, perhaps enough to prevail and become the new government are small d democrats who would be allies of the US and friendly to Israel.

Secretary Kerry has been at great pains to assure Congress and the nation that there are no plans for a war with “boots on the ground.”

But people with military experience know it could become war.  National War College Scholar Christopher Bassford summarized thousands of years of military history.  A military attack ignites:

…a dynamic, inherently unstable interaction of the forces of violent emotion, chance and rational calculation.

The inherently unstable interaction could provoke unanticipated reaction from Assad, the rebel groups, or one or more other nations, drawing America into something more complex, requiring deployment of more military resources than expected, perhaps even including ground troops.  This is not a risk-free undertaking.

Even if there are no unanticipated problems collateral deaths and destruction are to be expected.  Assad’s propagandists will produce photos and video of dead bodies, crippled children, and demolished schools and hospitals that Assad will claim resulted from the American attack.

Next week the President will need lots of Republican House and Senate votes because more than a few members of his own party are always against any military operation and will certainly not see his Syrian adventure as worthy of their votes.  But his lack of leadership, indeed his unwillingness even to affirm his own position as the red line guy will not inspire confidence that he is competent to carry out an effective attack without horrendous complications.

The argument in favor of Congressional approval is to sustain America’s credibility in the world and especially among the thugs of the Middle East.  But Obama’s conduct has already diminished our credibility. 

With the polls showing overwhelming  public/voter opposition, and a President who is already trying to evade accountability before the first missile lifts off, Democrats and Republicans will find it difficult to shoulder responsibility for authorizing an attack on Syria.

ObamaCare’s Vanishng Small Business Tax Credit

Since the Administration’s earliest efforts to persuade America that ObamaCare will do more good than harm, one of the most hyped selling points has been “small business tax credits.”

This is the second of four articles comparing the promises in the President’s 2009 speech with the reality of ObamaCare implementation.  The first is here.

In a September 2009 speech to a joint session of Congress the President promised:

For those small businesses who still cannot afford the lower-priced insurance available in the exchange, we will provide tax credits, the size of which will be based on your need.

More recently, during one of the President’s endless campaign tours, he told the audience:

Small business owners who provide health care to their workers can sit down at the end of the week, look at their expenses, and begin calculating how much money they’re going to save!

Wow!  Weekly savings for the small business employer to count. Sounds exciting, huh?  The President and the government PR machine hope to plant a perception that ObamaCare treats small employers generously and they have no reason to complain.small-business-tax-credit table

But, as with all the promises of ObamaCare, the implementation particulars fall short of the hype.  It turns out that the small business tax credit is so limited and restrictive it’s worthless or nearly worthless to most small businesses.

  • The tax credit does not apply to the cost of health insurance for business’s owners or partners. 
  • It doesn’t apply to relatives of owners or partners who are employees in the business.
  • If a businesses grows to 25 full time employees it it’s tax credit vanishes.
  • If the employees’ average wages rise to $50,000 per year are the tax credit vanishes.
  • If the employer chooses a health plan that costs more than the government later determines is more costly than the “average” in the employer’s state, the tax credit is retroactively reduced.

But even these miserly rules make the tax credit appear to be more generous than it is.

It turns out  that the  maximum credit, 35% of the employer’s health care cost, applies only to businesses with fewer than eleven employees who pay average wages of less than $25,000 per year to full time employees.

For employers who hire more than ten employees, or pay more than $25,000 the law imposes a ruthless sliding scale, slashing the value of the tax credit in response to each additional employee and each dollar of increased wages.  The table above shows the value of the tax credit to six hypothetical employers.  

It gets worse next year

For some, probably most small businesses, even this stingy program will vanish at the end of 2013.  After that the tax credit will be allowed only if the small business employer buys an ObamaCare compliant insurance policy through the Small Business Health Options Program or SHOP a government run exchange. 

Because ObamaCare compliant policies come with a raft of new mandates, including a package of “free” (no co-pay) benefits, they will be substantially more expensive than the health plans most small businesses now choose.  Thus, for most small employers it will be less expensive to them to keep the policies they have even though they’ll lose the tax credit. 

Next: ObamaCare is a textbook example of the law of unanticipated, undisclosed consequences.

ObamaCare: 2009 Promises Vs 2014 Reality

Healthcare-speechOn September 9, 2009 the House and Senate Democratic leadership called a joint session of Congress so President Obama could appear on prime time TV, under the most favorable possible conditions, to sell their “health care reform,” what is now called Obamacare. 

To impress the TV audience Mr. Obama entered the hall with State of the Union style pomp and ceremony, complete with several minutes of cheering and applause from all the Democrats and a hundred or so loyal supporters in the balcony.

This is the first of four articles comparing the promises in the President’s 2009 speech with the reality of ObamaCare implementation.

The speech was designed to present only the promised benefits of the pending health care law and to hide costs and risks. 

Obama opened with a list of horrors he claimed were the result of too little government intervention.  One of the most important, indeed one of the top two or three reasons why he insisted the nation should submit to a government take-over of health insurance and medical services was:

Everyone understands the extraordinary hardships that are placed on the uninsured, who live every day just one accident or illness away from bankruptcy…There are now more than thirty million American citizens who cannot get coverage.

Four years later one can only wonder why supposedly free people are being forced to endure the wrenching implementation of Obamacare.  According to the Congressional Budget Office (CBO) there are some 55 million Americans who are uninsured now, in 2013.  The latest CBO health care report  projects 30 million or more will be uninsured in each of the next ten years –  the same as in 2009 when the President gave his big speech!CBO projected uninsured

The President went on to assure us that Obamacare would address the problem of people who could not afford insurance with government run “markets” called exchanges:

Now, if you’re one of the tens of millions of Americans who don’t currently have health insurance, this plan will finally offer you quality, affordable choices…We will do this by creating a new insurance exchange – a marketplace where individuals and small businesses will be able to shop for health insurance at competitive prices.

Reality turns out to be another disappointment. Back in April the Administration quietly disclosed that the Small Business Health Options Program or SHOP would not comply with the law’s requirement that employees of small businesses be offered several health plan options, like government and big business employees are.  Instead, depending on state and county there will either be one small business option or none at all.

While the President presented the individual exchange as a gift from government it’s actually an enforcement mechanism for the individual mandate.  Everyone above a certain income threshold who is not part of an employer insurance group must purchase Obamacare-compliant insurance, which includes an expensive package of coverages and provisions.

Nearly all states that have determined the cost of ObamaCare-compliant individual policies in their exchanges found that they will be will be much more expensive than the individual plans now available to their residents.  For example:

  • The Florida Office of Insurance Regulation just issued a report on all eleven insurance compares that will be offering policies in the Florida exchange, comparing the cost of their current individual policies with the the cost of their new ObamaCare compliant policies.  The increases average 35%, with the highest at 55%.
  • The Ohio Department of Insurance announced that individual consumers buying ObamaCare-compliant health insurance on the federal government’s health insurance exchange for Ohio will pay an average of 41 percent more than they did in 2013.
  • Maryland’s largest health insurer predicts a 25% increase.
  • In New Jersey a very popular low-cost health plan will no longer be offered.  Approximately 106,000 policy holders will be required by federal law to switch to more expensive government approved plans.

There are reports of similar increases, as much as 150%, in several other states. Next:  Small business tax credits promises vs reality

No Thumbs Up for the July Jobs Report

Historic deterioration of the labor market makes monthly jobs numbers meaningless.

The unemployment rate is misleading because millions of jobless people are not counted.  The number-of-jobs-created headline is misleading because of an unprecedented increase in part time employment. 

When the latest jobs report was published the White House guided headline writers with this spin from Alan Krueger, Chairman of the President’s Council of Economic Advisers:

While more work remains to be done, today’s employment report provides further confirmation that the U.S. economy is continuing to recover from the worst downturn since the Great Depression…Today’s report from the Bureau of Labor Statistics (BLS) indicates that the unemployment rate declined from 7.6 percent to 7.4 percent in July, reaching its lowest level since December 2008.

As usual, the White House is seeking to mislead those who don’t have the time or inclination to dig into the numbers.  A drop from 7.6% to 7.4% looks like significant progress until you discover how it came about.

Arc-of-participation-Aug-20

It turns out that most of the decline in the unemployment rate was due not to more people finding work but to fewer people being counted as unemployed. 

To qualify as “unemployed” one must seek work continuously.  But people become discouraged after many months or even years of fruitless job hunting and seek employment less often.  Because they were not actively involved in job searches during July government statisticians reclassified 240,000 jobless people from “unemployed” to “not in the labor force,” so they were not included in computing the headline unemployment rate.

The labor force participation rate, tracked in the chart above is the percentage of the working age population that is in the labor force.  The labor force is the sum of all those who have jobs plus all those who qualify as “unemployed” by actively seeking work.

Since the recession ended in June 2009 the labor force participation rate has fallen from 65.7% to 63.4% because more than six million people have been reclassified from unemployed to not in the labor force.  If all those people were still counted as unemployed, the July 2013 unemployment rate would have been a catastrophically high 10.6%.  If the labor force participation rate were the same as it was before the recession began in 2008 the unemployment rate would be over 11%

The Chart above, by tracking the labor force participation rate since 1980, and shows why America still suffers so much economic misery even as the unemployment rate declines.

 As the American economy recovered from a severe recession in 1980 and 81 the participation rate went up at the same time the unemployment rate went down.  In that recovery employers were creating jobs rapidly enough to reemploy all those who had lost jobs in the recession and accommodate the second half of the baby boom generation, tens of millions of men and women who reached working age during those years.

Those who are old enough to have lived through the 1980s as adults remember an explosion in job opportunities as the economy roared back to life.  Then, the declining unemployment rate was an indicator of greater prosperity and economic opportunity.  But today, because of an unprecedented drop in labor force participation, the unemployment rate is not an indicator of progress toward prosperity.  Instead it’s an indicator of the grim reality faced by millions of long term unemployed men and women.

Major Shift to Part Time Employment

Most of those who are counted as newly employed are underemployed.  According to the Labor Department Household Survey 980,000 previously unemployed people found jobs in the first seven months of 2013.  But  more than two-thirds of those jobs are part time.  full-part-time-2013

The spike in part time jobs appears to be statistical confirmation of one of the adverse, unintended consequences of ObamaCare. 

ObamaCare will require employers to provide health plans that include a very expensive package of government mandated benefits to full time employees.  But it does not require any health insurance for part time employees working fewer than 30 hours per week.   The incentive to replace full time jobs with part time jobs is obvious, especially for employers in low-margin businesses that simply can’t afford to meet the Obamacare insurance requirement.

From May to July the population of part time workers increased  535,000, while the full time workforce shrank by 148,000.

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