Promises vs. reality: A look at ObamaCare

Americans may recall that President Obama promised, “If you like your healthcare plan, you can keep your healthcare plan.” While this mandated coverage in the healthcare reform legislation was desired by many people who are willing to pay the cost, there were certainly other medical insurance consumers who preferred their lower cost coverage. However, contrary to the president’s assurance, they were not permitted to keep their preferred lower-cost healthcare plans.
 
The healthcare reform legislation had a devastating impact on the spending power of working Americans and our economy as the higher premiums kicked in. In order to understand this impact, it is instructive to look at the actual impact of the legislation on a small company. In 2010, this company’s plan cost was approximately $15,000 per year for family healthcare coverage, of which the company paid 60 percent and the employee paid 40.  For 2011, the premium for this coverage increased 30 percent, or $4,500. The average non-management employee in this company earns $30,000 per year. The employee’s share of the increased premium cost was $1,800. That is equivalent to a 6 percent pay cut for the average worker! The legislation did not allow him to keep his old policy at a lower cost.
 

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The unintended consequence of this reduction in spending power on American workers is a shift in spending from non-medical consumption to medical consumption. This translated into a negative impact on spending for consumer items needed to help support the tepid American economic recovery.
 
The impact of this increased premium on the employer is equally devastating. The employer had to bear $2,700 of the increased premium per employee. That meant the direct cost of his labor increases 7 percent! If the business has 100 employees, this cost the business $270,000. The increased cost either came out of profits, in which case the employer had less to invest in his business or create additional jobs; or it was passed on to consumers in the form of higher prices, which resulted in less consumption. In addition, many employers opted to suffer the government's penalty for choosing not to provide healthcare for their employees, which was actually less expensive. Also, those employees who enjoyed their health plan and were promised by our president they could keep it were obviously not allowed to. In either event, the increased premium costs had a negative impact on the country’s fragile economic recovery.