Who Wins with the Affordable Care Act? | DCR Workforce Blog

Who Wins with the Affordable Care Act?

The linkage between economic actions is complex and almost incomprehensible, as the impact of each act spreads to other parts of the economy and causes other events, creating a state of flux.

Lewis Black admitted in all candidness, “I took economics, and I’d explain it to ya, but I flunked that course. Not my fault. They taught it at 8 o’clock in the morning. And there is absolutely nothing you can learn out of one bloodshot eye.”. Now we have Ray Dalio, whose hedge fund, Bridgewater, netted him a personal fortune of $13 billion, is revealing economic principles in simple terms, with tips which helped him to predict macroeconomic cycles in a YouTube video titled How the Economic Machine Works.  As I could access the video much later than 8O’clock and without bloodshot vision, I was wishing the insights would translate to my understanding of the latest news concerning the Affordable Care Act.

Now that the Act is moving into an active phase, and the health exchanges have opened up; I have my antennae up to understand its implications not just for employers, but also staffing companies who would have to fulfill their role as employers to the temporary workers they deploy with various clients.

Sure enough, I was immersed in this piece of news which covered a boutique staffing company. I have attempted to summarize their story here:

  1. The couple worked hard to build the business to a stage where they have 18 permanent employees and 400 temporary workers, whom they deploy on assignments with various clients.
  2. The 18 full timers enjoy generous health benefits.
  3. The staffing firm wants to add another 200 workers to its existing roster of 400 temporary workers.
  4. The hours worked by some of them would make these temporary workers count as ‘full-time staff’.
  5. In effect, the firm will have to pay health benefits for 200 employees, under the ACA.

Pay or Play?

With a law like ACA which allows an employer to choose whether to pay or play – the staffing firm now has 2 options.

  • Extend the existing employee health program to all the workers at an estimated cost of about $2 million and go bankrupt, or pass the overhead to the clients by re-negotiating their contracts.
  • Choose not to provide any insurance to the employees and pay the fine of $400,000 instead; in which case the state or federally managed health insurance exchange will take over the task. This plan would deprive the current staff employees also of the health benefits they have been enjoying to date. The employer could choose to pay for the existing employee’s health plans indirectly, by increasing their pay, but the increase in gross pay required to cover the private exchange healthcare costs and cover the incremental taxes on the increased wage base exceeds what the company can afford.

The questions to be asked are: Do we understand at a macro-level the overall economic impact of this legislation?  Does it extend healthcare at the expense of jobs?  What is the true cost to a mid-tier company of complying with ACA, and can that cost be borne in light of the impact of the recent recession?

These questions may have been asked, but they have not been answered. The Act set out to address the fact that there were 49.9 million Americans (or 16.3%) whose healthcare was uninsured (Census, 2010) We are told that Americans die every year because they have no health insurance and 62% of all bankruptcies are filed by people whose medical expenses went too high.

It is a hard act to juggle two such opposing claims.  We need to avoid the law of unintended consequences.  Without a true and clear understanding of the total financial impact of ACA on businesses, we are reminded of the old silent movie image: the villain evicts a widow with a flock of young children saying “You must pay the rent!” while the poor widow says, “But I can’t pay the rent!”


Disclaimer:
The content on this blog is for informational purposes only and cannot be construed as specific legal advice or as a substitute for competent legal advice. They reflect the opinions of DCR Workforce and may not reflect the opinions of any individual attorney. Do contact an attorney for advice specific to your issue or problem.
Lalita is a people/project manager with extensive experience in operations, HCM and training and development across industries like banking, education, business consulting, BPO and information technology. She believes in a dynamic approach to life and learning as change is the only constant.