Will The Supreme Court's 'Obamacare' Ruling Hurt Job Growth?

In a boost to President Obama and his supporters, the U.S. Supreme Court voted Thursday 5-4 to largely uphold the health care reform law, called the Patient Protection and Affordable Care Act. (Its expansion of Medicaid for the poor was scaled back, though, giving states' greater control.) The much-anticipated ruling had some surprises.

At issue was the individual mandate, by which the federal government will compel Americans to buy health care insurance if they don't receive it through an employer's plan. (Companies with 50 or fewer employees are exempt. Otherwise they and all Americans who aren't insured face a financial penalty. Subsidies are available for lower-income Americans.) The court said the mandate could stand because it was really a tax, which is protected by the Constitution. But what does this mean to Americans and their jobs -- and their health care, which is often provided through their employer? (DailyFinance has taken a look at how the ruling and law will affect your wallet.)

Despite critics' complaints about "Obamacare," some experts say most workers won't see major changes. "The point is largely academic," says Paul Fronstin, the director of the Health Research & Education Program with the Washington, D.C.-based Employee Benefit Research Institute.

According to Fronstin, many employers already offer health care to be able to compete for workers. But because the law requires private insurance exchanges for the uninsured, workers likely will find the following:

1. More choice of plans from employer-based coverage.

2. When you change your job, you won't have to lose your plan because you can hold onto it through the exchanges.

"This [ruling] could give a little more closure going forward," he adds, provided that the law isn't repealed by congressional Republicans or a President Mitt Romney.

Opponents of the law have claimed that the ACA will lead employers to cut jobs, while supporters expect the economy to be able to add jobs.

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The ACA represents the most significant social legislative overhaul in the U.S. since President Lyndon Johnson passed Medicare in 1965, and so there's no perfect case study to predict how the ACA will affect the economy. But on a smaller scale, Massachusetts, under Mitt Romney while he was governor of the Bay State, enacted a universal health care law in 2006 that became an inspiration for President Obama's law. Nonpartisan experts have studied the Massachusetts law and find no negative jobs impact; but critics, including some business owners, predict a grim future, especially for small businesses and their employees.

What Romney's Health Care Reform Law Shows

A new study put out by the Urban Institute with funding provided by the Robert Wood Johnson Foundation suggests that the federal health care reform law won't cause job loss. The nonpartisan Washington D.C.-based research institute analyzed Romney's own health care reform law (which, ironically, he championed as governor of Massachusetts), and how it impacted the jobs market, and then compared that to other states that didn't implement health care reform from 2006 to 2010. (The Romney campaign didn't respond to AOL Jobs' requests for an interview.)

The study's authors, Lisa Dubay, Sharon K. Long and Emily Lawton, determined that the Massachusetts law and the federal law were similar enough to merit a comparison, thanks largely to the common mandate that most individuals be covered either through their employer or by other means. And the authors do concede: "Economic theory suggests that when employers are required to offer health insurance coverage ... employers will reduce wages and ... employers may respond by demanding less labor."


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But that wasn't what happened in Massachusetts, they concluded. "Massachusetts has achieved its goal of near universal health insurance coverage under its 2006 health reform initiative," the authors note, "with no indication of negative job consequences relative to other states as a result of health reform."

Conclusion: "The evidence from Massachusetts would suggest that national health reform does not imply job loss and stymied economic growth."

Does The Law Decrease Wages?

Critics argue that employer health care costs will increase under "Obamacare," and that would cause employers to cut jobs or reduce hiring. Romney's Massachusetts health care law suggests this isn't the case, however. In Massachusetts, when some businesses spent more on health insurance, employers didn't lay off staff, says Dubay. "What we see in Massachusetts is how [increased spending] in fact didn't shift the labor market."

Health care spending "is not as huge a factor on the economy as people think, especially in the near term," says Jared Bernstein, a senior fellow at the Center on Budget and Policy Priorities, and a former adviser to Vice President Joe Biden. "Many of the dynamics are offsetting. You would think companies would be able to hire less, but you've got a lot more coverage with a lot more people in the system."

In addition, some provisions of the ACA that kick in by 2014 are designed to help offset the higher health care costs for employers, and therefore reduce the likelihood of employers' reducing their staffs, says Bernstein. The ACA requires medical providers to coordinate care through accountable care organizations so as to reduce duplication.

The ability to "bundle" payments for a medical episode into one bill, as opposed to paying each provider who takes part in the care, has a similar effect. New taxes on high-end "Cadillac" policies also help offset increased spending. These provisions have the effect of making health care spending count for more, as the argument goes, and make their spending more valuable.

Critics Predict A Grim Future

Critics of the law foresee a range of negative fallouts from the ACA, including $1.4 trillion that taxpayers will have to pay to fund the program over the next 10 years. They also argue that the bundling will not make health care more efficient, and see the mandates as leading to job loss. "It's simple: For employers, if you make something more expensive, you'll get less hiring," says Arlene Holen, who is a senior fellow at the Technology Policy Institute and was an associate director of the White House Office of Management and Budget under Presidents Reagan and George H.W. Bush.

Indeed, nearly three quarters of 1,339 small-business executives said, in a survey conducted by the U.S. Chamber of Commerce in March, that the ACA makes it more difficult for them to hire people.

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In explaining why the ACA complicates hiring, the critics focus on specific provisions of the law beyond the general mandate. Speaking before the House Ways and Means Committee on Jan. 11, 2011, Douglas Holtz-Eakin, the president of the American Action Forum who was also John McCain's chief economics adviser during the 2008 campaign, addressed the ACA provision that allows companies with less than 50 employees to be exempt from the mandates.

He discussed the impact on a company that adds that 51st employee. Such a decision, he noted, "will trigger a penalty of $2,000 per worker" on the number of employees that exceeds 30 when those workers also receive health subsidies through outside health exchanges. "In this case," he added, "the fine would be $42,000," or 21 times $2,000. "How many firms will choose not to expand?"

Holen, for her part, says low-wage employees are particularly vulnerable under the health care plan. Companies have less incentive to bring on low-earners for whom they will have to provide health care, she argues.

"If a person's salary is very high, then adding another few thousand [for health care] is relatively not significant," she says. "But, for someone who isn't going to earn much, requires a lavish policy; the employer will look for a machine or someone on the Internet to do the job instead."


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Filed under: Employment News
Dan Fastenberg

Dan Fastenberg

Associate Editor

Dan Fastenberg was most recently a reporter with TIME Magazine. Previously, he was a writer for the Thomson Reuters news service's Latin America desk. He was also a reporter and associate editor for the Buenos Aires Herald while living in South America.

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sallyanncohen

The country will be bankrupt by the Obama travesty -- you cannot lose doctors (many are getting out now); and insure more people -- and then expect to have a health system that is cheap - each American will pay much more in taxes including the middle class and everyone will be looking at the ruin of our excellent health care system. AOL is spending many articles trying to hide the financial facts about the take over and painting the health mess caused by Mr. Roberts and Mr. Obama as a rosy picture...the roses will fade and die as will many having to accept the substandard medical care of any govt. run system-Britain is an excellent example.

July 25 2012 at 1:57 AM Report abuse rate up rate down Reply
Orion Dhc

With all this guy's experience, one would think he would have got this one liner correct : "Companies with 50 or more employees are exempt. Otherwise they and all Americans who aren't insured face a financial penalty. " -- If you didn't catch it, the law says companies with "Fewer Than 50 Employees are exempt." not the other way around. Get the facts straight bro.. you call yourself a journaist for goodness sakes.

July 16 2012 at 12:35 AM Report abuse rate up rate down Reply

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