July 22, 2013

Evil Genius is as Stupid does

Stupid is as stupid does. So goes the saying in Forrest Gump.  Stupidity it reasons, can be determined as it is indicated in one's actions. In the case of Obamacare though, evil genius is as stupid does.

There's an article in the Wall Street Journal today by Andrew Puzder, a restaurant CEO, who emphasizes that he doesn't see Obamacare's employee mandate working, as he describes in the example of his own business:
The new law's success depends on young, healthy people who are lower-risk signing up for health insurance to offset the costs of insuring individuals who are at higher risk. If predominantly high-risk individuals sign up, health insurance is going to be very expensive. Yet, even after the ACA takes effect, people will still be able to get medical care at the emergency room. Further, the ACA prohibits insurers from denying coverage because of pre-existing conditions. In other words, individuals will no longer have much incentive to get health insurance as a hedge against the possibility of developing a medical condition...

On average, our general managers earn $50,000 per year. Should they decline insurance coverage, they will be subject to an initial annual penalty of $500 and a maximum penalty of $1,250. We estimate that their share of paying the health-insurance premium through our company plan will range between $2,000 and $3,000 per year, well in excess of any potential penalty.

The lowest-paid employees who qualify for ACA coverage (as opposed to Medicaid) earn about $11,500 per year. They would be subject to an initial penalty of $115 and a maximum penalty of $695. We currently estimate that their share of health insurance premiums will be $1,091.55 per year—again, well in excess of any potential penalty. So, in the first year, our employees' insurance costs likely will be four to 10 times more than the ACA's penalty on the uninsured.

This is why I am concerned that the ACA could actually cause the number of our covered employees to decrease, particularly in the first year. The penalty for declining coverage will be low compared with the cost of coverage; and employees will know that if they happen to get sick, they can get insurance after that. So the economically rational decision for young people, like our crew employees, is to pay the penalty and forego the insurance. Despite what the government may believe, our employees are smart enough to figure this out.
Evil genius?  Well, if you want people to forego their existing coverage, and the coverage to decline as a percentage of overall market share - on your way to single payer (government) insurance - then having that mandate help push people out of plans is indeed evil genius, posing as a stupid, poorly thought out portion of 2700 pages of legislation.
The administration may be politically blind, but they are shrewd when it comes to getting things to go their way, and this is one example of that 'evil genius' at work. 

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