Microeconomic Implications of the Affordable Care Act

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Table of Contents

Introduction
Positive implications of the act
Economic consequences
Impact on low-wage employees
Loss of existing insurance coverage
Increase premiums in the individual market
Conclusion
Works Cited

Introduction

The Patient Protection and Affordable Care Act is a bill passed into law by the U.S. president Barrack Obama in the year 2010 (Goodson 12). This act is normally referred to as Obamacare. The act is one of the most important government developments and regulatory revamps in the United States’ healthcare system in the last 50 years.

The act mandates all insurance companies to provide medical insurance cover to all claimants regardless of their social background, sex, race, or ethnicity. The chief aim of the act’s drafters was to reduce the number of uninsured Americans. Before and after the passage of this law, critics asserted that the law was a threat to everyday workers.

Despite the fact that the law was meant to reduce the cost of medical access for the low-income population, critics argue that the law would ultimately leave employees worse off. Skeptics argue that the law would cost jobs, suppress economic recovery programs, and cause business doubts. This paper seeks to highlight the microeconomic effect of the act. In the paper, the effects of the act on an everyday worker would be highlighted and evaluated.

Positive implications of the act

Currently, the top three issues of the U.S. health care system affecting the employees are reduced access, reduced quality, and increased costs. When the act will be fully implemented in the year 2014, the government expects the act to tackle the above health issues. The U.S. health care system has continuously faced multiple challenges.

By the time the government stopped its heavy-handed managed care in the 1990s, the cost of health care services had risen sharply as the number of uninsured individuals increased. Before The Patient Protection and Affordable Care Act was passed into law in the year 2010, the number of uninsured individuals was estimated to be more than 46 million (Goodson 35). Equally, during this period new medical technology, pharmaceuticals, and workforce were in great demand.

As the country’s life expectancy continues to increase, its population will continue to age leading to more chronic health issues. In the year 2006, the U.S. healthcare system was reported to be among the most costly system in the world. According to these reports, the U.S. government spent over $2 trillion in health care expenditure during the same year (Pipes 56). These figures are disturbing since the above expenditure represents 16% of the country’s gross domestic product.

In the act, several mechanisms have been outlined on how to tackle the above issues. These mechanisms are mandates, tax credits, and subsidies. Within a period of 10 years, this act will ensure that every American has access to quality and affordable health care services. Through this approach, almost every employee would be covered by the health insurance scheme. Therefore, quality healthcare services will be accessible to all employees.

Economic consequences

According to the Congressional Budget Office, the act will lead to significant job losses. It is estimated that the act might lead to 650,000 job losses. An analysis by business owners group indicates that the employer mandate enshrined in the act will ultimately lead to eradication of up to 1.6 million jobs for the next five years. On the contrary, Centre for American Progress insists that with the passage of this act 250,000 to 400,000 jobs would be created within a period of ten years.

Critics have refuted these figures arguing that the CAP’s analysis relied on unsubstantiated cost estimates. At the time these conflicting approximations were released to the public, economists send President Obama a note indicating the economic consequences of the proposed bill. In the letter, the economists indicated that the bill contained some provision that would threaten job creations, reduce working hours, reduce wages, and reduce jobs.

According to the economists, the job-killing stipulations contained in the bill were New Tax, New and Increased Medicare Taxes, and the Employer Mandate. Through the New Tax provision, the act seeks to collect over $500 billion in the next decade. Notably, a larger share of these taxes would be collected from small business owners.

This implies that these individuals affected would see their capital being reduced resulting in stunted economic growth. Through this, everyday workers, who have been employed by these individuals, might lose their jobs. Equally, New and Increased Medicare Tax provision will affect the small business sector. Given the fact that millions of Americans are employed in this sector, their future employment is at stake.

As time passes, the provision would reduce the wages earned by these employees. In general, the above stipulation would threaten jobs and reduce economic growth. Another stipulation contained in the act that would affect employees is the Employer Mandate. This stipulation seeks to enforce a tax of up to $2000 per employee in an organization hiring more than 50 workers.

The tax would be applicable to all organizations that do not provide health insurance to their employees. Similarly, through this stipulation the government aims to tax all employers offering unaffordable health insurance schemes to their employees. It is apparent that the employers affected by this stipulation would reduce employment opportunities or passed on the insurance burden to their employees in terms of lower wages and reduced work hours.

Impact on low-wage employees

Substantial evidence indicates that with the passage of this law, low-wage workers were likely going to be affected than other workers would. As the act discourages employers from recruiting new workers, they will be forced to come up with other means of reducing the cost of doing business. Economists have pointed out that for higher skilled workers employers would obey the government directive and offer the required benefits. However, these employers would compensate the cost by reducing these employees’ wages.

On the other hand, economists have pointed out that employers would be offered with little reason to offer medical insurance cover to their low skilled workers. Therefore, employees would reduce job creation and employment for this category of job workers. Given the fact that the number of unemployed adults without a high school diploma is on the rise, this act would greatly affect the lower wage employees.

Some economists argue that in some situations, some employers would find that it hard to reduce the wages offered to their employees. To survive in such situations, these employers would respond through other ways. These ways would include outsourcing, reliance on temporary agencies, and increasing part time employees. Through these approaches, employers would bypass the act stipulations because the mandates do not apply to these approaches.

Loss of existing insurance coverage

Some economic experts assert that affordable care is too costly. In this regard, several employers would shun away from offering their workers with health coverage. In this event, employees would be forced to seek government-run insurance schemes. When the act will be finally implemented, it is estimated that millions of American employees would be unable to maintain their current coverage.

For instance, early this year a firm by the name Universal Orlando declared that it was planning to stop offering health coverage for its part time employees (Schmidt 10). The firm asserted that Obamacare’s prohibition of yearly benefits to be enforced in the year 2014 was going to increase their operational costs. According to the firm’s human resource manager, the plan was going to affect more than 500 employees in their organization.

Another organization that will drop coverage for some of its employees is Deloitte. According to the company’s reports, more than 10% of the company’s employees would be affected by the plan. The individuals who will lose their coverage would be forced to seek new government-run exchanges. With these illustrations, it is apparent that millions of American employees together with their dependants would lose their current insurance covers.

Increase premiums in the individual market

Currently, the effects of the affordable health act on premiums have generated heated debates in America (Ross & Betsy 12). Others argue that when the act would be fully implemented in the year 2014 premiums would sky rocket. On the other hand, some individuals argue that with full implementation premiums would reduce significantly.

Notably, the Obama administration is divided on the issue. Other individuals believe the cost would rise while others do not. Some experts have warned that premiums would vary depending on individuals’ age or sex. As such, women may realize lower cost in their premiums unlike men. Equally, older customers might experience a drop in the price of their premiums unlike the younger generation. According to Miliman Consulting Firm, premiums would increase next year by 9%.

The firm argues that the increases would be in order with the current premium hikes. The firm asserts that the increases could have been witnessed regardless of the act in place. With these discrepancies, Americans have to wait for next year when the affordable health plan would be fully in operation to realize the impacts of the act. This implies that it is now difficult to estimate the full impact the program will have on American employees and employers.

Conclusion

Although some consequences of affordable health care are debatable, it is apparent that the plan would result in reduction of employment for less skilled laborers. Therefore, Obama’s administration should put in place measures that would ensure that the less-skilled laborers do not lose their jobs. While these measures are in place, the administration should answer several questions concerning the myths that have been generated by the media and the employers on the effects of this plan.

Some employees have the wrong impression of the effects of this plan. Thus, the government should sensitize the public on the possible effects of this act. During the sensitization programs, the government should not be biased. Through this, the employees would learn about the implications of this act on their careers. Similarly, the government should be ready to amend the act if it reduces jobs or slows down the country’s economy as critics allege.

Works Cited

Goodson, Jefferson. The patient protection and affordable care act. New York: Viking, 2010 . Print.

Pipes, Sally. The truth about Obamacare. Washington, DC: Regnery Pub. ;, 2010. Print.

Ross, Betsy. Beating Obamacare: your handbook for surviving the new health care law Washington, D.C.: Regnery Pub., 2013. Print.

Schmidt, Paul L.. Medicare and the Patient Protection and Affordable Care Act. Hauppauge, N.Y.: Nova Science Publisher’s, 2013. Print.

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