Recent Posts From Brian Gilmore
Former House Speaker Nancy Pelosi (D-CA) infamously stated in 2010 that “we have to pass the bill [ObamaCare] so that you can find out what is in it.” It was a curious comment, one that could have any number of meanings. Here’s what I understood it to mean: This bill is so damn big, has so many moving parts, and will radically remodel the relationship between the civil society and government to such a degree that there is no way for Americans to conceptualize what life will be like under the ObamaCare utopia until we implement it.
Well, the time is nigh. And for employers, guess what? You’re really about to find out what’s in it. The employer mandate and its associated excise tax penalties are a cornerstone of the fundamental transformation President Obama has so long desired. In the ObamaCare solar system, everything revolves around the exchanges. Employer mandate excise taxes, enforced by the same IRS that recently admitted to targeting Tea Party groups, will provide crucial funding for the massive exchange subsidies.
One of the ObamaCare requirements associated with the employer mandate that has been largely under the radar until this week is requirement to provide employees with a notice informing them about the ObamaCare exchanges. From Section 1512 of PPACA:
PART II—EMPLOYER RESPONSIBILITIES
SEC. 1512. EMPLOYER REQUIREMENT TO INFORM EMPLOYEES OF COVERAGE OPTIONS.
California AB 880: “This bill would make it unlawful for a large employer to, among other things…reduce an employee’s hours or work…if the purpose is to avoid the imposition of the penalty. A violation of those provisions would result in a penalty of 200% of the penalty amount the employer would have paid for the applicable period of time.”
ObamaCare’s employer mandate is off to a disastrous start even before it kicks in. The CBO has already scored the measure to cost employers $150 billion in draconian excise taxes over the next eleven years, and there’s no telling how much the compliance costs will total. Most employers are in no position to shoulder this burden. How have they responded? For many, the only hope has been to reduce employees’ hours because the employer mandate and its associated penalty taxes apply only to employees who average at least 30 hours per week. Regal Entertainment Group recently announced that it would join the long line of mega-sized employers to be reluctantly forced down this road.
“Though the earth, and all inferior creatures, be common to all men, yet every man has a property in his own person: this no body has any right to but himself. The labour of his body, and the work of his hands, we may say, are properly his. Whatsoever then he removes out of the state that nature hath provided, and left it in, he hath mixed his labour with, and joined to it something that is his own, and thereby makes it his property.” — John Locke, Second Treatise of Government (1690)
What is “spending through the tax code?” This is an important question in light of the Obama FY 2014 budget proposal finally unveiled last week. We already know it raises taxes by more than $1 trillion. Much of this is done by eliminating so-called “tax expenditures.”
Here is how the Joint Committee on Taxation defines a tax expenditure:
Tax expenditures are defined under the Congressional Budget and Impoundment Control Act of 1974 (the “Budget Act”) as “revenue losses attributable to provisions of the Federal tax laws which allow a special exclusion, exemption, or deduction from gross income or which provide a special credit, a preferential rate of tax, or a deferral of tax liability.”
It’s well established by this point that ObamaCare’s full implementation in 2014 will cause premiums to increase significantly. This cold fact draws a sharp contrast to President Obama’s campaign promise that he would cut the average family’s premium by about $2,500 per year, and Nancy Pelosi’s 2012 pledge that under ObamaCare “everybody will have lower rates.” The Obama administration is now searching for talking points to explain these failures as the looming realities of 2014 begin to confront the administration’s prior platitudes.
The latest theory making its way through the Beltway is that coverage under ObamaCare will be more expensive because it will provide the type of comprehensive coverage that we’ve all been waiting for. Here is how the AP reported on HHS Secretary Sebelius’s recent comments in response to a study by the Society of Actuaries finding that insurance companies will have to pay out an average of 32% more for medical claims under ObamaCare:
At a White House briefing Tuesday, Health and Human Services Secretary Kathleen Sebelius said some of what passes for health insurance today is so skimpy it can’t be compared to the comprehensive coverage available under the law. “Some of these folks have very high catastrophic plans that don’t pay for anything unless you get hit by a bus,” she said. “They’re really mortgage protection, not health insurance.”
Let’s put aside for a minute that ObamaCare is unconstitutional, adds $6.2 trillion in debt, piles on countless new taxes, and has already racked up $31 billion and 71.5 million hours in regulatory compliance costs. Yes, that’s a lot to put aside. But for just a moment assume the role of a liberal with an entitlement mentality. For a law with enormous riches and political capital invested in it, wouldn’t you expect it to at least function on its most basic level consistent with its namesake? In other words, you would expect for the Affordable Care Act to provide affordable coverage.
The latest of ObamaCare’s fundamental flaws to be euphemistically reported as a “glitch” that needs to be “tweaked” is its failure to provide affordable family coverage for a broad group of employees. As a result, Kaiser Family Foundation estimates that 3.9 million family dependents may not be able to afford employer-sponsored family coverage or receive subsidized coverage on an ObamaCare exchange.
Understanding the family glitch requires a quick primer on the byzantine regulatory structure governing Obamacare’s subsidies:
Backed by $674 million in federal grants, California’s slick new ObamaCare exchange site for purchasing PPACA-approved health coverage starting January 1, 2014 is now up and running. You can tour this marvel of government-driven healthcare at CoveredCA.com. Only 288 days until “coverage” begins!
Some of the highlights:
- The exchange materials refer to Covered California as a “marketplace” rather than an “exchange.” This is a recent policy change directive from HHS. As FreedomWorks’ director of healthcare policy Dean Clancy stated in response to the change, “They could call them motherhood or apple pie, but it wouldn’t change our feelings about them.” We subsequently learned that the real motivation for the change is that is that there isn’t a good Spanish translation for “exchange.”
Remember when Republicans took control of the House in the 2010 election by riding the anti-ObamaCare wave and pledging to repeal and/or defund it? What happened to that?
As I wrote last week, the repeal efforts have largely fizzled. Then on Wednesday, the House again voted for a CR that doesn’t even touch the funding for ObamaCare. The bill (HR 933, dubbed the “Department of Defense, Military Construction and Veterans Affairs, and Full-Year Continuing Appropriations Act, 2013,” would extend federal government funding beyond March 27 through the end of FY 2013 on September 30, 2013. Congratulations to the Boehner/Cantor/McCarthy gang for refusing to use the House’s power to originate appropriations bills to any meaningful effect.
The CR passed despite valiant effort by Rep. Jim Bridenstine (R-OK) and Re. Tim Huelskamp (R-KS) to encourage Boehner and Cantor to support the defunding efforts. The letter stated in part:
Last week, Senators Orrin Hatch (R-UT) and Lamar Alexander (R-TN) introduced the American Job Protection Act to repeal the ObamaCare employer mandate (a.k.a. the pay or play rules, or the employer “shared responsibility” rules). Companion legislation was also introduced in the House on the same day. Full text of the bill is available here.
As FreedomWorks reignites the movement to defund ObamCare in the House as we near the end of the CR on March 27, the American Job Protection Act offers a strong second front against one of ObamaCare’s most damaging provisions. Sadly, full repeal is not politically feasible right now. But that doesn’t mean we can’t keep trying to chip away at its more unpopular provisions through bills like this.
It’s Been Done Already
Let’s not forget that we’ve already repealed some of the nastier programs and mandates in prior legislation. As nicely summarized in this post on Forbes by Grace-Marie Turner, the law’s government takeover of the long-term care industry called the CLASS Act, a major piece in the original legislation, is now history. Other chunks now out for scrap include the burdensome $600 1099 reporting requirement and the odd employee free choice voucher, which would have allowed certain employees to apply their employer health plan contribution to the cost of coverage on the ObamaCare exchange.
Imagine that in 2012 you quit your job and poured all your savings into opening a restaurant that had 18 full-time employees and 15 part-time employees. The restaurant was a success. In 2013, you opened a second restaurant based on the same model and with the same number of employees. Another success. Your restaurants were profitable enough for you to take a salary of $60,000 in 2013. You decide to open a third restaurant in 2014.
Your third restaurant opens January 1, 2014 with the same number of employees as the first two. Based on your track record of success, you expect to be able to take a salary of $90,000 in 2014. But that was before you realized how ObamaCare can swallow your profits.
You’ve read and heard industry rumblings that ObamaCare’s employer “shared responsibility” rules require employers to provide coverage to full-time employees if you employed at least 50 full-time employees in the prior year. You had only 36 full-time employees in 2013. Regardless, you already offer coverage to your full-time employees, so you don’t worry about it. You instead work long hours with very few days off to establish your new third restaurant.
You receive notice from the IRS that you are subject to an ObamaCare penalty excise tax of $5,000 for January. Why? You failed to account for your part-time employees in 2013 when determining whether you are an “applicable large employer” subject to the new employer mandate. The rules require employers to aggregate all part-time employees into “full-time equivalents.”
Seemingly in response to this letter from Chairmans Darrell Issa (R-CA) and Dave Camp (R-MI) on January 29 to the Treasury and IRS, on February 1, the IRS again finalized the Obamacare subsidy regulations that flagrantly deviate from the statutory authority. This issue continues to simmer relatively under the radar since I last wrote about it in August. To refresh everyone’s memory, Obamacare’s core redistributionist provisions are its refundable premium tax credits and cost sharing subsidies available for individuals to purchase coverage on state exchanges starting in 2014. The credits will be available to anyone with annual income under 400% of the federal poverty line who isn’t covered under an employer-sponsored plan. To put that in perspective, a family of four today earning up to $92,200 per year would be eligible for the credits.
Federal Exchanges Excluded
Here’s the kicker: Obamacare specifically limits these credits and subsidies to individuals who purchase coverage on an exchange established by the state. Below is the actual, unambiguous provision from PPACA [emphasis added]: