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When Leviathan Eats its Tail

In an article published last week at National Review Online, subtitled "Municipal governments cut employees’ hours to avoid the Obamacare employer mandate," Jillian Kay Melchior writes:

"The health law mandates that employers with more than 49 full-time workers offer approved insurance coverage. If an employer fails to provide this but crosses the 50-worker threshold, it must pay $40,000 in fees plus $2,000 to $3,000 for each full-time employee over the first 50.

"Late last year, businesses including Carl’s Jr., Hardee’s, Red Lobster, and Olive Garden came under fire for accurately describing how the employer mandate would affect their hiring and employment policies. Because each additional full-time employee carries such a heavy cost, they warned, many small-business or franchise owners would choose not to expand their workforce.

"This summer, municipal governments are realizing they face the same problem. Across the United States, they are already facing financial strains. The Great Recession and the housing crisis caused property-tax revenue, a critical income source for cities, to decline sharply. The stimulus may have delayed the pinch, but now that federal and state aid to local governments is also on the decline, municipal finances are increasingly tight."

The article cites Dearborn, Michigan and Medina, Ohio as two cities that have already reduced their employees' hours. In fact, the article mentions the added cost for Medina will be "around $1 million" for its 27,000 residents. Assuming three residents per residential property,that amounts to over $100 for each residential property.

Consequently, I wrote the Arlington County Manager, and asked two questions. First, how many Arlington County employees will have had, or will have, their hours of work reduced as a result of Obamacare, and by approximately how many hours each? And second, how much will Obamacare's employer mandate add to the county's health care costs?

On August 15, I received the following response from the County Manager:

"Thank you for your inquiry regarding the impact of “the Affordable Care Act” on Arlington County employees and citizens.  Because of our size, the “employer mandate” was not a major factor for Arlington County.  We are clearly considered a “large employer” under the law with approximately 3,500 full and part-time employees.  Arlington County already makes health insurance available at a pro-rated cost to part-time employees who work at least 10 hours per week.  We have no plans to change that practice or reduce employees’ hours to avoid the requirement to offer them health insurance.

"There will be additional costs to the County’s health care plan as elements of the Affordable Care Act are phased in.  Going forward, the largest expenses we will incur are the Patient-Centered Outcomes Research Institute (PCORI) Fee and the Transitional Reinsurance Fee.  Those costs are projected at $1M total for the period 2013 through 2019 for the health plan. No determination has been made at this time how these costs will be shared by the County and our employees.

"Our plans are currently out to bid and often times during the review and bid process it becomes apparent that we need to make design changes to make our plans more affordable or vendors have negotiated better programs to offer employers so it is entirely possible that cost increases as a result of the Affordable Care Act can be offset by cost decreases as a result of vendor negotiations.

"We are committed to offering our employees the best health plans at the most affordable rates as possible.

"Hope that helps."

Let me get this straight. Before the Affordable Care Act (generally referred to as Obamacare), Arlington County employees, including part-timers, were provided health insurance benefits, which presumably were entirely adequate. Now for another $1 million or so that will be plundered from county taxpayers, the county will have to pay the two fees that are listed in the Manager's response. The PCORI fee sounds like nothing more than the price of more bureaucracy in the bowels of the U.S. Department of Health and Human Services (HHS). As for the Transitional Reinsurance Fee, perhaps it will be explained in one of the brown-bag lunches that were announced this week by HHS Secretary Kathleen Sebelius in order "to inform her employees about the basic elements of the Affordable Care Act" where "staffers will explain the law," according to another article by Andrew Johnson in National Review Online.

In a related article about health care coverage under Obamacare, the California Healthline news digest reports:
"On Wednesday, UPS and the University of Virginia announced that in part because of costs linked to the Affordable Care, both will stop providing health care coverage to employees' spouses who can obtain insurance through their own employer, the Washington Times reports (Howell, Washington Times, 8/21)." (emphasis added)
Perhaps the Leviathan may be eating more than just its tail.
 

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