The ACA’s four cliffs

by on April 5, 2013 at 1:52 pm in Law, Medicine | Permalink

…(1) the 50th employee (firms with 49 employees that don’t offer medical insurance will be hit with a $40,000 penalty if they hire just one more worker); (2) the 200 percent threshold (one households cross 200 percent of the poverty line, deductibles might sharply increase); (3) the 400 percent threshold (the dropoff is even bigger once households cross 400 percent of the poverty line); and (4) the early retirement incentive (ACA creates an incentive for many older workers below age 65 to exit the workforce) — reshapes the American labor market, the dominant narrative will be that the $85 billion in sequestration cuts are responsible for sluggish growth.

That is from Reihan, most of the post is on sequestration.

Edward Burke April 5, 2013 at 2:01 pm

1) will promote greater and greater worker productivity metrics? 2) will provide more incentives not to report or to under-report income? 3) will provide further and greater incentives not to report and/or to under-report income? 4) will help “save” Social Security? (id est: will not impair the system set up ostensibly to assist retirees rather than enhance the assistance putatively assigned to retirees)

Edward Burke April 5, 2013 at 2:16 pm

–so let’s stop calling it the Affordable Care Act and call it instead what it is: the Affordable Care Tax Act.

JWatts April 5, 2013 at 2:20 pm

(1) the 50th employee (firms with 49 employees that don’t offer medical insurance will be hit with a $40,000 penalty if they hire just one more worker);

I expect to see a boon in a lot of small businesses as 40-60 employee firms contract out non-essential tasks, to get and keep themselves below the 50+ line. Receptionists, IT personnel, HR people, etc have become a lot more attractive as Contractors than as Full time employees.

BigFire April 5, 2013 at 3:16 pm

In France, it’s call the 49 person company. When a small business needs to expand beyond that magical threshold, they’ll actually go through all of the red tapes and just create a second company.

JWatts April 5, 2013 at 2:29 pm

(3) the 400 percent threshold
My wife is pregnant with twins which will bring us to a family size of 6:

Current 400% threshold for a family of four = $92,200

Current 400% threshold for a family of six = $126,360

celestus April 5, 2013 at 2:46 pm

Are you suggesting that the ACA is Fridge Brilliance to increase fertility rates among the college educated?

Emil April 5, 2013 at 3:20 pm

Italy used to have a fiscal cliff (different taxes but same impact) on companies with more than 15 employees and another one on companies with more than 50. You can still see the effect going around business buildings where you’ll discover that there are several companies with very similar names and doing very similar things sharing office space.

Floccina April 5, 2013 at 3:28 pm

Didn’t he miss one? The cliff the one that separates part time and full time workers at 30 hours. This stuff is not that complicated, the politicians surely knew ahead of time that this would be bad, so why did they not smooth out the cliffs? I think it is because all politicians know that the voters are rationally ignorant.

BTW if it is so important that employers pay for health insurance why let small employers off and why not part time workers?

Andrew' April 5, 2013 at 4:07 pm

Or we can ask the party of science and realism why it’s important when almost all economists question the employer link to insurance.

msgkings April 5, 2013 at 4:28 pm

Because the party of Bibles and plutocrats would never in 6000 years (in other words as long as the Earth has existed) allow a change to healthcare as drastic as severing the connection with employers. The party of science and realism’s core wants what the economists want: no employer link, single payer run by the government.

anon April 5, 2013 at 6:01 pm

I wonder what the party of leave me the fuck alone wants?

mike b April 5, 2013 at 6:17 pm

they want to travel to a secluded valley and cook bacon and eggs for long lost industrialist heroes

Alexei Sadeski April 5, 2013 at 7:49 pm

Bacon and eggs… The cocaine and heroin of the 21st century.

dswarts April 5, 2013 at 3:55 pm

So what you are all saying is we should have gone to a single payer system do reduce the complexity and eliminate these thresholds.

Andrew' April 5, 2013 at 4:10 pm

So that’s your plan is it, keep passing more and more horrible shit until we just give in? Finally this all makes sense.

JWatts April 5, 2013 at 4:22 pm

+2, There’s always been a suspicion that this was the unspoken goal.

Careless April 5, 2013 at 11:10 pm

Unspoken?

“And next to me was a guy from the insurance company who argued against the public health insurance option, saying it wouldn’t let private insurance compete. That a public option will put the private insurance industry out of business and lead to single-payer. My single-payer friends, he was right. The man was right.”

That was my rep on why she wanted the public option. It wasn’t a secret.

Jay April 6, 2013 at 12:37 pm

So you are against pricing risk based on the underlying? How unscientific of you.

steve April 5, 2013 at 7:25 pm

Small firms, those with less than 50 employees, have typically paid about 15% more than larger companies to provide the same insurance to their employees. They have to pay for underwriting and broker’s fees. Since about 1/4-1/3 of workers are employed by firms that size, this would be a large savings.

http://www.healthaffairs.org/healthpolicybriefs/brief.php?brief_id=38

Steve

byomtov April 5, 2013 at 8:54 pm

You know, it’s really a shame that Obama didn’t listen to Republicans who suggested ways to improve the bill.

JonF April 6, 2013 at 1:38 am

Re: ACA creates an incentive for many older workers below age 65 to exit the workforce

Huh? The ACA will make it easier for such people to buy health insurance, but it doesn’t lower the age of Social Security benefits. Unless you have significant income from a non-work source, you will not (voluntarily) retire before you can collect SS.

Slocum April 6, 2013 at 7:50 am

No, it does not lower the age of SS benefits. But right now, one of the things that keeps people from retiring at 62 is the fact that Medicare eligibility starts at age 65. So subsidized health insurance under ACA will encourage/enable even more to retire at 62. And then there are the public sector workers who are eligible for pensions in their 50s but who may not have medical benefits provided — this removes that impediment to their early retirement.

JonF April 6, 2013 at 3:02 pm

Yes, some few people will be able to retire earlier. But the vast majority of people won’t be able to. As story after story has reminded us, including some here, most Americans are not saving enough for retirement and are not covered by pensions: more and more people are going to keep working into the late 60s and beyond because they cannot afford to retire. The ACA will not change that. Nor will those early retirements hurt us in any way: Under 62 retirees will not be collecting SS, and the program is balanced by lower payments to those who do retire at 62. And the taxes early retirees might have paid will be replaced by other people moving into their positions (and approximate salaries) when they retire. I have trouble seeing how this is any sort of problem.

Statspotting April 6, 2013 at 6:06 am

Funny, how the world works – 49 is a special number for companies in France as well –

http://statspotting.com/49-the-magic-number-for-companies-in-france/

Zephyrus April 6, 2013 at 12:58 pm

The writer’s initial misunderstanding of how marginal tax rates work does not add to the article’s credibility… no, an increase in marginal tax rate does not mean earning a dollar will cost you thousands of dollars.

There are certainly places in the tax code where the effective marginal rate is above 100, but that rarely has to do with the listed rates and instead usually has to do with benefits phasing out.

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