The famed free-market thinker Friedrich Hayek once opined, "The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design." Were Hayek alive today, I believe he would single out Obamacare as the best possible illustration of this maxim.
It turns out that, despite the unbounded confidence of the 20-something-year-old Capitol Hill staffers that wrote it, reordering approximately 20 percent of the economy of the largest industrial power in the history of mankind through a 2,700-page bill that few legislators actually read let alone understood, has led to a few, potentially devastating, unintended consequences.
This past week, after already announcing several implementation delays on other aspects of Obamacare, the administration disclosed that it would postpone the start of the employer mandate from 2014 to 2015. This employer mandate is a foundational piece of the president's reform, and I believe that congressional Republicans are perfectly justified in challenging the administration's decision to ignore the plain language of the statute. The proposed delay is extralegal and sets a horrendous constitutional precedent.
But I can also understand the president's hesitancy to move forward with the existing employer mandate. Enforcing the employer mandate as written could drive the U.S. economy back into a recession and exacerbate the federal budget deficit.
The Obamacare employer mandate requires companies with more than 50 full-time employees to provide health care insurance for each one of them or face a $2,000 per employee fine. Employers in competitive industries built on low-skilled or hourly labor will be hit the hardest by the mandate. These businesses, which employ millions of people nationwide, operate on thin margins and are price takers in the marketplace (meaning they cannot turn around and demand higher reimbursement from their customers). Many of these businesses will not be able to afford the Obamacare fines. To survive, they will likely move every full-time employee they can to part-time status. The burden of Obamacare's employer mandate will fall upon the low-skilled workers, who will lose large chunks of their income and still be without health care.
Companies with more than 50 full-time employees, which currently provide health care coverage, pay about $4,000 per individual and about $11,000 per family in annual health care premiums. When the mandate goes into effect, it is almost certain that many of these employers will choose to end their health insurance benefits, pay the $2,000 per person fine and encourage their employees to apply for federal subsidies to purchase health insurance through the new, federally administered insurance exchanges. Such a move would shift much of their existing health care expenses to the taxpayers. The employer mandate will likely be much more expensive than originally anticipated, adding billions more to the trillion-dollar Obamacare price tag.
Both of these strategies are perfectly legal, and are rational economic responses to the Obamacare employer mandate. If the employer mandate goes into effect, and these businesses act in their own interests (whether for survival or to maximize profits) the disruption to the economy will be substantial.40 comments on this story
Our health care economy is the aggregation of billions of individual economic decisions made every single day. While some proponents of Obamacare seem to possess unbounded confidence in its ability to heal what ails us, there is simply no single cure-all solution that can be administered to so complex a marketplace. I believe the best course of action would be to repeal Obamacare and start over on health care reform. Short of that, delaying its implementation is a prudent step. In politics, as in medicine, the proper philosophy when it comes to active intervention must be "first, do no harm."
Dan Liljenquist is a former state senator and U.S. Senate candidate.