QUESTION: Are employers over reacting to Obamacare (which I don't think even starts until October, and is completely enacted by 2015)? I thought the main point of Obamacare was to make the government compete against normal insurance companies and make sure everyone is covered so they are not dependant on the insurance their employer offers in case they are let go? Does Obamacare say anything about making employers give health insurance to part-time employees instead of just full-timers? My boss says because of Obamacare (which hasn't started yet) we can't work more than 28 hours a week. Is that ridiculous or what?

ANSWER: Yes, employers are overreacting to the ACA.  A large proportion of companies actually have quite a bit to gain from it, but since the ACA has become the primary target of conservative partisanship, people are being told that it's going to be harmful.  Here's a couple sources of information on the impact of the ACA on employers.

Studies are also showing that the ACA will contribute to quite a bit of job creation, and not the job destruction that conservatives claim will occur.  This is supported by the experiment out of Massachusetts, as well as studies from the Washington state Office of Financial Management.

The long-term implications are still not well understood, though.  First, the ACA will increase negotiating power for job-seekers in the labor market.  Many people maintain underemployment or otherwise bad jobs simply because they need the insurance.  The ACA will reduce this reliance on employer-insurance, thereby improving economic growth through improved efficiency in labor distribution, and a stronger demand base.  It will also help some people to pursue the risks associated with entrepreneurship and self-employment, increasing innovation and competition.  All very good stuff.

The problem is that unless the ACA is expanded into full, public health coverage, such as that offered in Taiwan, it's going to be doomed to lose money over the course of the few decades.  The reason for that is that the public option is going to be incurring a lot of people who otherwise could not get or afford their insurance - the sick, injured, or those who would otherwise represent the highest-cost individuals to cover.  Insurance companies profit by paying less in benefits than they earn in premiums, and so the more people that are pay for coverage, the more they'll profit.  They could also, theoretically, charge less for coverage, but that doesn't happen in reality.  So, until the ACA is expanded to the point that private insurance companies disappear entirely, it's going to lose money, as we've seen in Germany (who has a similar program), and private insurance companies will continue to reap record profits at the cost of public health.

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QUESTION: So is it a bad thing that private insurance go away? Is there no way for them to be a part of it? And is there any significance to limiting employee hours to a certain number?

It would not be a bad thing for insurance companies to go away.  The value of the health insurance industry represents a massive price distortion equal to the amount we are overpaying for healthcare.  Wages and costs don't define demand for labor.  Companies will continue to demand labor hours until they meet demand because it is profitable to do so.  To look at it another way, companies will not hire even 1 additional person than they need to meet demand, so regardless of increasing or decreasing costs, it will not influence the demand for labor but, rather, the supplier surplus.  It will, in fact, increase hiring in the long-run through increased aggregate demand resulting from increased discretionary income and reduced medical financial risk from people who spend a very high proportion of their total income.


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Michael Taillard


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Economic Consulting: American Red Cross; US Strategic Command -- Economics Lecturing: Bellevue University (Bellevue, NE) Huijia College (Beijing), OPII Schools (Omaha), Madonna University (Livonia), Schoolcraft College (Livonia), ZomBCon (Seattle), Zombiefest (Lincoln) -- Media Appearances: Dead Man Working (2012 Movie documentary), The Heartland News (Omaha local news outlet)

American Economics Association, Business Networks International, Midwest Writer's Guild, Zombie Research Society

Economics and Modern Warfare: The Invisible Fist of the Market (Palgrave Macmillan) -- 101 Things Everyone Should Know about Global Economics (Adams Media) -- Corporate Finance for Dummies (Wiley) -- Psychology and Modern Warfare (Palgrave Macmillan) -- Analytics and Modern Warfare (Palgrave Macmillan)

PhD (Financial Economics; honors) -- MBA (International Business Finance; honors) -- Grad School Certificate (International Business Management; honors) -- BS (International Business Economics; honors) -- AA (Business Administration; honors) -- Certificate (Chinese Language and Culture) -- Trade School (Transportation Logistics; honors)

Awards and Honors
Philanthropy awards and nominations for the OPII Schools economic experiment

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