NCPA - National Center for Policy Analysis


March 12, 2010

The dirty little secret of President Obama's health care plan is that it will bring a major and irreversible upheaval to America's labor markets, says Benjamin Domenech, a former political appointee at the Department of Health and Human Services and the managing editor of Health Care News. 

In a time of economic tension, this plan will displace millions of workers and push more people into becoming contract employees, resulting in increased instability for working families.  One of the many original stated goals of the White House's health care reforms was the promise that you can keep your health plan if you like it.  However, the White House wanted to give businesses much-needed relief from burdensome health costs.  Like the desire to create a new entitlement while reducing the budget deficit, these aims are nearly impossible to reconcile, so Obama chose a path that accomplishes neither, says Domenech: 

  • The president's plan penalizes an employer for not providing insurance, but the government will subsidize the health care of workers without employer-provided insurance.
  • This effectively allows workers to receive the same compensation package they get today, but with government footing the health benefits part of the bill, so employers have no need to make up the difference in cash.
  • The economic benefits of that subsidy far outweigh the penalties -- for low-income workers, it can result in an enormous difference of more than $17,000 a year. 

It's obvious what will happen under this plan, says Domenech: 

  • No small business that employs lower-income workers will find it makes economic sense to offer health insurance.
  • Any small business that does so will almost certainly fail, burdened by higher costs than their competitors'. 

This dilemma could be solved by making the penalties more draconian, but that too would cause business failures.  Moreover, as with the individual insurance mandate, too steep a penalty would make the plan even more coercive and unpopular. 

According to John C. Goodman, President, CEO and the Kellye Wright Fellow of the National Center for Policy Analysis: 

  • High-paid workers with employer-paid insurance will cluster in some firms, while average- and below-average-wage workers will cluster in others.
  • Overall, ObamaCare will create irresistible economic pressure to restructure the entire labor market. 

Source: Benjamin Domenech, "ObamaCare's Two Americas," Heartland Institute, March 11, 2010.


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