A Looming Crisis — & a Call for Solutions
May 6th, 2013 // 3:51 pm @ Oliver DeMille
Most Americans have no ideas it is coming. But it is just around the corner.
It’s one of those technical changes that only wonks pay attention to, so few people realize how big this will be.
In fact, it’s a serious crisis in the making. And unlike the Y2K scare in 1999, this crisis is a sure thing.
What is it?
Well, put simply, this coming January, many companies will be required to extend Obamacare health care to their employees.
The costs of this are significant, and will force many small and larger businesses to make some very tough choices.
The result will be a lot of layoffs, downsizing, reduced pay, and outsourcing.
Service will suffer, and response times will plummet.
Most families and individuals plan on a yearly basis, running January 1 to December 31, so they may not know how that a lot of businesses run on a fiscal year—from April 1 to April 1, July 1 to July 1, or October 1 to October 1.
This is very important, because we just witnessed the first big round of businesses (whose fiscal year is April to April) factoring in the costs of the January 2014 Obamacare requirements.
The number of layoffs and cuts is a serious concern.
But those who run April to April have only had to factor in three months of Obamacare costs so far, so the damage has been minimal.
It’s going to get increasingly worse on July 1, and then by October 1 it will start having a major impact.
By the first of January, when everyone will have to pay the higher costs, the effect will be huge.
Again, because this is a numerical concern, most people aren’t paying attention. Here’s the crux of the problem:
- Our economy is already struggling with a weak recovery.
- The increasing tax and regulatory burden on business has dampened innovation.
- The schools seldom teach innovation or initiative—indeed they usually promote the opposite.
- International innovation is rising.
- Business is reticent to invest or spend, because the current environment in Washington is highly uncertain.
- Big business, which has a high surplus right now, is finding better political environments in other nations—so the money will naturally flow to where business is treated better.
- The Obamacare requirements are making business a lot more costly, and they mostly kick in this coming January.
A lot of businesses are scrambling.
For example, in the past few months I’ve received email from a number of friends who are business owners or who consult with small businesses—saying that their only choice is to either lay off a lot of employees or shut down their business.
One company, for example, is trying to prepare for next year, but has realized that the additional cost of Obamacare for their firm will be at least $18,000 a month.
This is a fairly small company, with close ties to its people.
The last thing it wants to do is lay off employees. But what to do? The costs are simply prohibitive.
Laying off is the obvious option; and after digging deeper, it may be the only option.
How would you counsel companies in this predicament? (Note that most companies are dealing with this right now.) What ideas do you have? I’m sincerely asking for input.
What can they do?
Thousands of companies are asking the same thing right now, and many others will do so before the end of 2013.
This is going to be a real shock to the economy.
A crisis is coming.
But back to the question. How can small companies that are already financially tight comply with the new regulations—without laying off or cutting salaries?
I’m hoping you see some real solutions.
The obvious one is to innovate—to expand sales into new markets and make a lot of extra cash.
The regulatory challenges of such a strategy are, alas, a serious problem. At least in the United States.
So, thinking like an owner, what would you do?
I know you don’t have financials or details in front of you for any one company facing this challenge, but take a stab at this problem anyway—because almost all businesses are doing the same thing right now. It’s the only realistic way to look at Obamacare, because it’s the way pretty much every business owner is looking at it.
Specifically: Costs are going up significantly, with no offsetting increases in income.
In fact, higher taxes and increased regulations make growth even more difficult.
In this environment, how can you absorb the Obamacare costs without laying off a bunch of employees?
Or letting them go and hiring all new people who are desperate for jobs and will work for much lower pay?
Or simply taking your business to Brazil or India or some other country where growth is actually rewarded?
Please send me your responses. What can be done?
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Oliver DeMille is the chairman of the Center for Social Leadership and co-creator of Thomas Jefferson Education.
He is the author of A Thomas Jefferson Education: Teaching a Generation of Leaders for the 21st Century, and The Coming Aristocracy: Education & the Future of Freedom.
Oliver is dedicated to promoting freedom through leadership education. He and his wife Rachel are raising their eight children in Cedar City, Utah.
Category : Blog &Economics &Entrepreneurship &Featured &Government &Leadership &Producers &Prosperity
Keith
10 years ago
I am a startup currently negotiating a first round of investment capital. If a major class action law suit does not surface (showing how big corporations have a waiver from Obama Care), then obviously innovation is the game.
The coop model will rise significantly. In fact, there is such a thing as a Multi-Stake Holder Coop that allows for outside investors at the same time.
It is a numbers game. Purchase catastrophic emergency care only and then start seeing companies educate for better health through every means, including supplementation, gardening, and just watch companies start with their own farmers markets and coop clinics that can keep costs down. It is not a certain amount of money we need to spend per employee. It is certain amount of medial coverage or service. So, hell why not compete.
Say to future employees, “Employment with us includes medical taken care via our coop clinic and we have three doctors to choose from plus out coop network of specialists. We stress nutrition, better lifestyle, and please use our natural foods market. We have raw milk, fresh eggs, organic produce all significantly below cost.” Make every employee subscribe to sites like healthranger.com and we have a weekly thirty minute training on health, nutrition, and the evil designs of man. In the first meeting, tell them how evil aspartame is, that it is the biological excrement of ecoli bacteria and that it is highly addicting, destructive, and dairy farmers are currently working with the FDA to allow them to redefine milk so that they can put it in without labeling it. It is in all gums, sodas, and everywhere. The horrific attack on human health is the real enemy and Obama Care is not the enemy. Obama Care is pressure for innovation, a great chance for communities and small businesses to rise and take back so much liberty and responsibility that they have lost over the years. If we see Obama as a political nightmare to fight, we fail to see the option to dive below the wave and make our way into the ocean of opportunity to pick our own wave to ride rather than get buried by the whitewater of federal control.
What is so sad is to see so many choose to fight the coming waves of control and never learn to ride them.
Allen Levie
10 years ago
Thank you Oliver and what an excellent comment Keith,
I looked at the list of problems in the article and this was my first response (not as direct as Keith’s):
Economy: People need to be more confident and optimally producing, which ought to be a process of personal and community transformation. As a long-term solution, this could be substantively initiated and carried out through college campuses.
Taxes: A political problem, solved by changing the way we get things done politically. Unfortunately one size continues to fit all, as people are treated as equals before static laws. Political involvement and education needs to become more experiential and personally hubbed, facilitated by localized, voluntary and connected personal change.
Schools: Change the way students learn, fund and are accountable by optimally involving personal-relations.
International innovation rising: Establish hubs and facilitate international innovation, but not do it primarily through mass communication.
Washington problem: Change it. Use inside-out communication and build integrity without resorting to mass communication. Blogs, Facebook and Twitter won’t cut it. Communications need to be more deliberate as they are connected to real personal change.
Obamacare: Innovatively repeal it. Better track health improvement and then care for each other and publish it from inside-out through personal-relations, not via mass communication; there’s got to be an app for this. Decentralize institutions when possible and make it as easy and as doable as possible step-by-step. Find alternative healthcare options and make them functional and easy.
–Sorry, solutions were so repetitive.
With regard to the $18,000 a month problem. The best I could come up with was to shift to contracting with independents and make it as step-by-step doable as possible, but I think I like Keith’s option just as much. I wonder what a company would have to do step-by-step to become compliant, while taking the “catastrophic emergency care” option.
If the options were more readily digestible, with pro/con simplicity and then with the current status of innovation toward solutions and then access to collaboration tools, the problem would likely become a non-issue.
Chstopher
10 years ago
Is this a sovereign nation? Shall we build it or forsake those who gave their lives for it?