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Healthcare Carryover

The historic reform bill creates a variety of countervailing pressures on the job market.
 
 
By Michael Beygelman
 
 
President Obama signed the new health care bill into law on March 23, 2010. Almost immediately thereafter, 12 state attorneys general filed lawsuits to block the bill on the grounds that the terms of its requirement that “everyone have health insurance” are unconstitutional. It appears as though Washington, D.C., is going to continue the health care battle long after the bill’s signing into law.  Yet what kind of impact will the bill have on U.S. employers? Will it create more jobs, have no effect on the job market, or will it slow down the U.S. jobs recovery?
 
 
Let’s examine the timeline for the bill’s enactment requirements.  First, later this year, the bill will provide tax credits to help small businesses with up to 25 employees get and keep coverage for their workers—this is certainly a good thing.  However, the bill also imposes a 10 percent sales tax on indoor tanning, so those that run tanning salons will need to figure out how to absorb a 10 percent increase in cost or pass it on to their consumers.  Suddenly, looking like you live in southern California will become more expensive.
 
 
Employers will be required to report the value of health care benefits on employees’ W-2 tax statements by 2011.  While seeing this number on the form might be shocking to employees, the additional administrative burden involved in facilitating this requirement will not likely yield any effect on the job market.  However, in 2013 a series of much more meaningful enactments will kick in. Standardizing insurance company paperwork will be the first in a series of steps to reduce administrative costs.  This means companies might hire more administrative people, as well as consulting firms and attorneys to help with the process.  On the other hand, the bill will impose a 2.3 percent sales tax on medical devices.  This means that somehow either the cost has to get passed down to the consumer, or the value chain of companies that manufacture, distribute, and retail these devices has to absorb these costs—and maybe even cut jobs.  The good news is that eyeglasses, contact lenses, hearing aids, and other everyday items that you can buy at a local drug store are exempt from this tax.
 
 
The further out we go, the more impactful the changes become.  In 2014, and thereafter, employers with more than 50 workers will be penalized if any of their workers wind up being covered through newly created health insurance coverage and receive a tax credit for the same.  This penalty on employers can be quite severe—$2,000 for each such worker employed by the company—but employers will be able to deduct the first 30 workers.  There are two views on this—the cynical and the practical. 
 
 
Two Perspectives
The practical viewpoint is this: If a company chooses not to cover its employees, the government is going to charge the company anyhow and is going to provide that employee coverage.  The idea is that $2,000 is probably less than the company would pay for coverage anyway and this way all employees are covered.  However, this will be a substantial impact on some companies that will undoubtedly cut the size of their workforces in order to be able to afford to pay the penalty. 
 
 
From a cynical perspective: If today a company is paying $8,000 to ensure an employee has healthcare coverage, and tomorrow a company has to stop the coverage and pay a $2,000 for the government to provide the employee coverage, I can see thousands of companies getting in line to take the government up on this deal.  The only question that remains is how can the government provide comparable coverage at substantially lower rates? That remains to be seen. For now, let’s take that leap of faith and assume that such a windfall could potentially mean that employers might add substantially to their workforces because their cost basis to employ people will be substantially reduced.
 
 
There are additional provisions that kick in to effect in 2018, but those become more nebulous the further out we go.  The long-term question of whether or not the health care bill will be a catalyst or a headwind to job creation still remains, and it will likely take some time before we see any related outcomes.
 
 
All that said, one thing is for sure—the pen industry will surely benefit from the health care bill and any new upcoming regulations.  President Obama used no fewer than 22 pens in signing the new health care bill—and that’s a lot, even by presidential standards!  Let’s hope that the personal thank-you that each one of those souvenir pens represents results in a healthier economy and job market. 
 
Michael Beygelman is SVP, business development, with Adecco Group North America. He can be reached at michael.beygelman@adeccona.com.

 

Tags: Benefits, Contributors, Engaged Workforce

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