For the last two years many businesses have been warning that because Obamacare will hurt them so badly they will cease offering employees healthcare and dump employees onto the Obamacare exchanges. But now the IRS has ruled that business will not be allowed to do this and this move guarantees that companies will begin a massive wave of layoffs to make up the costs.
An article in The New York Times relays the bad news to employers that no matter what they thought they were going to do, they are stuck with the massive new costs of Obamacare and they won’t be able to escape that massive tax increase by just closing out their healthcare benefits.
“Many employers,” the Times reported on May 25,”had concluded that it would be cheaper to provide each employee with a lump sum of money to buy insurance on an exchange, instead of providing coverage directly.”
When employers provide coverage, their contributions, averaging more than $5,000 a year per employee, are not counted as taxable income to workers. But the Internal Revenue Service said employers could not meet their obligations under the health care law by simply reimbursing employees for some or all of their premium costs.
Christopher E. Condeluci, a former tax and benefits counsel to the Senate Finance Committee, said the ruling was significant because it made clear that “an employee cannot use tax-free contributions from an employer to purchase an insurance policy sold in the individual health insurance market, inside or outside an exchange.”
If an employer wants to help employees buy insurance on their own, Mr. Condeluci said, it can give them higher pay, in the form of taxable wages. But in such cases, he said, the employer and the employee would owe payroll taxes on those wages, and the change could be viewed by workers as reducing a valuable benefit.
So, what will employers do in response to this “clarification” of IRS rules? Isn’t it obvious? They will begin to fire employees so that they can use those salaries to pay for this massive new tax.
Obamacare will also eventually be responsible also for any new company startup refusing to include healthcare as part of its compensation package in the first place, too.
Of course, some may like the latter idea. After all, liberals have been trying to decouple healthcare coverage from employment for a long, long time. This is their biggest success with that goal to date.
But it will make healthcare more expensive for the individual. Not to mention that perhaps tens of thousands of jobs will be permanently lost as a result.