07.08.2014 0

Steel company paying fines rather than comply with Obamacare employer mandate?

pscLogoBy Robert Romano

In 2010, when the Labor Department issued its interim final rule on employer-based health insurance, it was estimated that as many as 69 percent of the 149 million employer-covered market — some 102 million people — would not be grandfathered in under Obamacare.

That is to say, these individuals would lose their existing coverage.

Now, with the employer mandate arbitrarily delayed until 2015 and 2016 depending on the size of the plan — a year after it was statutorily required to take effect — an outstanding question has been how many of them will lose their coverage all together?

This may come down to the fines imposed by the law. Already, Ohio-based PSC Metals, a subsidiary of Icahn Enterprises named for billionaire owner Carl Icahn, is said to be ending its employer-based coverage starting in 2015.

United Steelworkers District 1 director David McCall blasted the end of the employer coverage, and promised to take the case to the National Labor Relations Board. “The ACA was never intended to be used by employers as an excuse to deprive workers of insurance, yet Carl Icahn would rather pay the fine than negotiate a contract,” McCall said.

Maybe so. Perhaps Icahn — a really smart investor — really would rather pay the fine than buy the insurance. And examining the law itself, it’s easy to see why.

When the law is fully implemented, employers with 50 or more employees will have to pay a $2,000 fine for each employee not covered under the mandate — minus the first 30 employees.

Suffice to say, that is cheaper than employer contributions to health coverage, which according to the National Council of State Legislatures in 2010 averaged $3,918 nationwide.

For example, if an employer has 500 employees, it might expect to spend $1.9 million or so for providing health coverage for the employees and their dependents.

But if that same employer opts not to provide any coverage, and instead incurs the fine for 470 employees not covered, that will only cost $940,000. Therefore, not complying would save this hypothetical company almost $1 million every year.

So, the question is not whether companies will dump employer coverage, but how many will dump it. Reportedly, the Icahn-owned PSC Metals has decided to save the money.

Who will be next? Such is one of the perverse incentives of the employer mandate.

Of course, these revelations might compel lawmakers or regulators to simply increase the costs of the fines, so that they are more than what employers would pay to provide the health care.

But, if the premiums turn out to be too onerous, companies might just decide that it is no longer cost effective to do business in the U.S. altogether. In the end, the employer mandate could just mean more jobs shifted overseas.

Talk about the law of unintended consequences.

Robert Romano is the senior editor of Americans for Limited Government.

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