Should Arkansas Continue A Ridiculously Expensive Program To ‘Save’ Businesses From A Mandate That Doesn’t Exist?

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Clint Eastwood talking to the employer mandate.

In his radio address last week, Governor Mike Beebe said,

Last year, the Legislature approved the private option for good reasons. The only thing that has changed since then is that we have better information, stronger assurances from the federal government, and tens of thousands of Arkansans who now have insurance coverage.

Beebe’s suggestion that these are “the only things that have changed” suggests something less than a firm grip on reality. I guess Governor Beebe was napping when the biggest Obamacare news of 2013 broke? On July 2nd, the Obama administration announced their plans to delay the employer mandate. (This wasn’t surprising news to those of us who foresaw this and cautioned the legislature not to make decisions based on a mandate that will probably never come to fruition.)

Shockingly, the Gov apparently was not the only one who missed the big news in July 2013: two weeks ago, the state Chamber of Commerce released a new report that claims ending the “private” option will cost Arkansas’s businesses “$27 million to $40 million” in new taxes.

How do they arrive at this conclusion? Well, so their argument goes, the Supreme Court upheld the employer mandate (as a “tax”) and complying with it will cost Arkansas businesses $27 to $40 million per year. Under the “private” option, however, businesses would be able to dump these people onto taxpayer-funded insurance plans instead of providing the plans themselves, hence “saving” millions of dollars.

Allow me to explain why the Chamber’s argument makes very little sense.

First, and most importantly, these savings are based on a mandate/tax that does not exist this year and will likely never exist. The employer mandate was supposed to go into effect last month; its imminence was a central justification for the “private” option being passed last year. But the mandate didn’t come — it was delayed — and it now appears likely to never arrive (national health policy pundits on the right and the left are now calling for the mandate to be permanently repealed). This begs the question: why should Arkansas taxpayers continue to pay for an enormously expensive plan to deal with a mandate that doesn’t exist?

Secondly — and this is also a very important question — even if the employer mandate was guaranteed to take effect in 2015, why should Arkansas spend (on average) $200 million over the next ten years to “save” $30-$40 million? Isn’t this a net spending increase of over $100 million? Won’t this money ultimately come out of the pockets of Arkansas businesses and consumers?

I posed these questions to Arkansas Chamber CEO Randy Zook. He declined to respond directly to these particular questions, but he provided this statement for the record:

The law, as interpreted by the Obama administration, says that businesses will be liable for this sheer participation tax beginning January of 2015. That’s less than a year from now. We can only advise our member businesses to be prepared for what the law says. This is part of the fault of uncertainty that is plaguing business on every front right now. What are the rules and when will they be implemented and how in the world are we supposed to make long range plans given this on-again off again approach to things? So, all we’re saying is, as the law currently stands, beginning January ‘15, Arkansas’s larger employers — over 50 employees — are likely to face a substantial increase in costs in the form of these sheer participation taxes that will be levied at the tune of $3,000 for each employee who shifts to some kind of subsidized participation in the private option or in the Medicaid program…That’s all we know. That is a fact. That’s not political speculation, that’s a tax that is embedded in this law as it currently stands…

At some point, if the law stays in place as written, at some point somebody’s got to pay for it. You know, you can’t have the coverage — you can’t put people on insurance program — without somebody paying for it.

I admit that I’m unsure exactly what point Zook is trying to make here, but I do appreciate his eagerness to remind Arkansas voters and businesses just how bad Obamacare is for our state’s economy. With that said, I strongly disagree with him that implementing a significant aspect of Obamacare is the best way to stop Obamacare’s harmful effects. Congressional supporters of Obamacare, like Mike Ross and Mark Pryor, have done enough to harm our health care system — is it really necessary for Arkansas lobbyists and legislators to compound the problem?

Zook is right about one thing, however: uncertainty created by government is crippling the ability of businesses to make long-term plans. That’s why it makes no sense to me for the legislature to continue the “private” option, which will necessarily lead to tax increases in not-too-distant future. In addition, no one can project how much those tax increases will have to be — the premium costs are largely unpredictable — and there is good reason to believe that the federal government will have to break its promise to fund 90% of the program in the long term. Finally, plans being floated right now around the legislature that would allow the “private” option to continue into next fiscal year will only prolong the debate over the plan indefinitely. Talk about uncertainty.

The best way to provide certainty for Arkansas businesses is to reject the foothold Obamacare has been given through the “private” option. The triple whammy of growth in the state budget, higher taxes, and more burdensome federal regulations is the only certainty that the “private” option creates.

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