Obamacare is a Devastating Tax on the Poor and Uninsured

Mises Daily: Thursday, November 12, 2009 by Eric M. Staib

Given the recent announcement that the government’s measure of unemployment has hit 10.2 percent, and given that the official House version of Obama’s healthcare plan, HR 3962, has now passed, a close examination of the effects of “Obamacare” on the labor market is important. It will be no surprise to readers of this site to learn that the Democrats’ bill will seriously harm precisely those poor and uninsured citizens it is ostensibly designed to help. The harm will come by compounding mass unemployment and depriving these citizens of consumption choices.

Obamacare as Labor Tax

According to pages 269–273 of the gargantuan bill,Download PDF employers of full-time workers will be required to cover at least 72.5 percent of the premium of the least expensive health-insurance plan available that fulfills the bill’s minimum criteria of “acceptable coverage.” In cases in which family coverage is provided, 62.5 percent of the premium is to be borne by the employer. Depending on the specific plan and other variables such as location, this amounts to a direct labor tax of approximately $300 per month for an individual, or nearly $700 for family coverage.

The implication of this increased cost is that workers whose revenue productivity is less than $300 per month higher than their wages will be laid off, or have their hours cut to the level that will classify them as part-time. Ignoring established labor law, the bill leaves the definition of part-time and full-time to the discretion of the Commissioner of Obama’s massive new health bureaucracy. The lower the new “Health Choices Commissioner” sets the threshold in an attempt to maximize the number of people receiving the employer contribution, the more hours of production employers will have to shave off to push their employees under the threshold, and the less those workers will take home in wages each week.

Unfortunately, the bill also requires employers to cover a (smaller) percentage of the premium of the same minimum plan for part-time workers. The effects here are even worse than above, because they weaken the ability of an employer to escape the labor tax by employing his workers for fewer hours. Instead, with a labor tax on part-time workers as well, some low-productivity workers who are currently only working a few hours per week will be forced out of work entirely.

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