ObamaCare Side EffectsSmall businesses won’t grow, and more employees will work fewer hours. That’s just for starters.

by Karl Rove

Harvard (and later Columbia) sociologist Robert K. Merton wrote in 1936 about the “unanticipated consequences of purposive social action.” Pity that Barack Obama, an alumnus of both universities, either never read or took to heart Merton’s warnings. It would have saved Americans a lot of misery.

The president certainly did not promote the Affordable Care Act by promising it would mean more part-time and fewer full-time jobs. Yet that is one of its unanticipated consequences.

A major provision of ObamaCare requires companies to provide health insurance to any employee who works more than 30 hours a week or pay a $2,000 per-person fine. Not surprisingly, the number of hourly employees working 30-34 hours a week dropped by an average of 146,500 a month over the past year, according to the Bureau of Labor Statistics. The number working 25-29 hours rose by 119,000 a month.

Consider individual workers such as single working mothers who need at least 35 hours waiting tables plus tips to make ends meet. If they are cut to under 30 hours, they will have to look for second jobs. If these moms can find a second job, they’ll still have to juggle schedules, child care and transportation. Overall, even if 1% of the workforce is thus affected by this squeeze, that’s nearly 1.4 million Americans.

Then there are younger workers, many of whom will start their careers by stringing together several part-time jobs, perhaps for years. Their predicament may delay when they start families, buy homes, pay off student loans and become independent.

The president’s health law also unintentionally operates to prevent the smallest companies from growing. Owners have a strong incentive to stay below the law’s 50-employee threshold at which they are required to provide health insurance.

Here the U.S. is following in the footsteps of France and other countries with sclerotic economies. Earlier this year, the National Bureau of Economic Research published a study of the French regulatory burden on businesses with more than 50 employees.

The authors found that “firms will optimally choose to remain small to avoid the regulation, so the size distribution becomes distorted with ‘too many’ firms just below the size threshold and ‘too few’ firms just above it.” The report also noted that “some of those firms just below the cutoff” have, thanks to the regulation, “been prevented from growing to their optimal size.”

ObamaCare will have other consequences. Today, employers with so-called self-funded health plans act as their own insurer, collecting premiums and paying claims filed by employees. In 1999, 44% of workers receiving employer-provided health coverage were in such plans, according to the Kaiser Family Foundation’s Employer Health Benefits Survey. Today, 61% are.

More companies have an incentive to choose self-funding because the 1974 Employee Retirement Income Security Act (Erisa) governs self-funded plans, not the Affordable Care Act. Erisa allows self-funded plans to charge premiums based on risk (unlike under ObamaCare), allows these plans to offer a wider menu of options, and lets them avoid such expensive provisions as ObamaCare’s new tax on insurance policies.

The success of self-funded plans in restraining premium increases and managing costs concerns ObamaCare supporters. Some are trying to make this kind of employer coverage less attractive by undermining stop-loss insurance. This is the reimbursement contract a self-funded plan makes with a reinsurer that helps manage risk by paying large claims above a per-employee deductible.

The California legislature, for example, wants to make self-funded plans less appealing by establishing a $40,000 minimum deductible. Minnesota and Rhode Island are considering bills to require a $60,000 deductible. None of the states has a minimum deductible today.

Delaware, New York and Oregon already ban self-insurance by small- or midsize companies. Administrators of self-funded plans also worry that new Labor Secretary Thomas E. Perez will ignore Erisa and issue regulations that erode the attractiveness of self-funded plans and push more companies’ health policies into ObamaCare’s morass.

The Affordable Care Act has yet to take full effect, but it is already beginning to exact a toll on workers and businesses. On top of all this, the Congressional Budget Office estimated in May that the number of uninsured Americans won’t fall below 30 million in the next decade. So much for ObamaCare’s promise of “universal” coverage.

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Karl Rove was Senior Advisor and Deputy Chief of Staff during the George W. Bush administration until Rove’s resignation on August 31, 2007. Since leaving the White House, Rove has worked as a political analyst and contributor for Newsweek, The Wall Street Journal and Fox News.


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