Thinking Out Loud: Obamacare – The Law of Unintended Consequences

I would argue that Chief Justice John Robert’s ruling that Obamacare passes the constitutional test because it contains a “tax” and not a “penalty” is ludicrous given that the language in the legislation clearly says that individuals are required to purchase insurance or pay a penalty — it specifically uses the word “penalty” — if they refuse to purchase insurance.  Thus the legislation clearly is meant to influence behavior — purchase insurance or pay a penalty — rather than raise revenue through taxes.  Which makes it unconstitutional.

But let’s leave aside whether Obamacare is really a law and instead focus on what it will become — a “law of unintended consequences.”  When Obamacare goes operational in 2014, all businesses with 50 or more full-time employees will be required to provide health insurance for those employees, or pay a penalty.  Either way, the costs of doing business for those companies will increase dramatically, meaning they will have to significantly increase the cost of their products, or find ways to cut other costs.

Or, they can take a third approach:  Either keep their total employees under 50, or reduce their full-time employees to part-time employees.

Today, several restaurant chains, which employ millions of workers, are taking the latter approach.  McDonald’s, Applebee’s, Red Lobster, Olive Garden, and the like have either already implemented, or are seriously considering, changing the status of the bulk of their employees from full-time to part-time by reducing their hours to less than 30 a week.  Since part-time employees aren’t covered under Obamacare’s insurance mandate, these restaurant chains would save hundreds of millions of dollars.

Ditto businesses with 50 employees (or more), also making them subject to Obamacare and therefore liable for tens of thousands of dollars in employee health coverage.  Many are considering laying off however many employees it takes them to get to 49, or turning enough full-time employees into part-timers to achieve the same goal.  (And for those with 49 full-time employees, don’t expect them to hire a 50th.)

Unsurprisingly — especially with the restaurant chains — there have been protests and calls for boycotts against these businesses, but the fact is: they are businesses.  They have workers, but also customers who make purchase decisions based on costs, and — for the larger businesses — shareholders who make investment decision based on profit and returns.  For them, as with almost all businesses, cutting costs is usually preferable to raising prices, so they are simply adapting to the huge cost burden that Obamacare would put on them.

It’s the classic “law of unintended consequences,” and, yes, it is the employees who will suffer.  But these businesses, large and small, didn’t write or pass Obamacare into law, and I’m guessing very few, if any, of them supported it.