The Affordable Care Act Increases Income Inequality

Chris Fitzsimon has written in these pages that theAffordable Care Act, commonly known as “Obamacare,” is “working.” As a professor, I try to work with clear definitions, so it’s difficult to respond to Fitzsimon — the ACA may or may not be “working” depending on what your measure of success is.

Reading between the lines, what Fitzsimon means by “working” is “people are enrolling in health insurance.” To our credit, North Carolina has had a better response than most states to the implementation of the ACA. Overall, though, an interesting question for sociologists to pursue is why so few people have signed up for a policy in which poor people may have to pay as little as $18 per month to receive a benefit to which taxpayers will contribute $5,000 per year.

Every policy has both intended and unintended consequences. The reason why polling shows consistent opposition to ACA — even among the poor and the uninsured — is that people realize the cost of the unintended consequences. One of the most surprising unintended consequences is that the ACA will likely increase income inequality.

President Obama has spoken out strongly against income inequality, but his signature law will increase income inequality, according to Unite Here — a union representing more than 300,000 employees in the service sector.

Unite Here was the first union to endorse Obama in the 2008 campaign and it has just completed its analysis of the ACA, entitled “The Irony of ObamaCare: Making Inequality Worse.” As the title suggests, legislation intended to increase the number of people with health insurance may ultimately make poor people poorer.

The Unite Here report begins by claiming that the ACA transfers $1 trillion — yes, trillion — from taxpayers to health insurance companies. As evidence, it notes that the stock price of the five largest insurance providers has more than doubled since the ACA was enacted, growing at more than double the rate of most companies.

The report doesn’t even refer to Section 1342 of the ACA, which essentially allows health insurance companies to apply for a “bailout” if they lose money because of the ACA, so that transfer might be even larger.

The report cites a study from the Brookings Institution that suggests that people in extreme poverty will benefit from the ACA, but that the group of people who will lose the most are those just above that on the financial ladder. Brookings concludes that the biggest losers are essentially the lower-middle class and below.

The report also notes that 388 companies have publicly announced that they will reduce full-time positions to those below 30 hours per week so that these employees will not be subject to the ACA. The report contains an interesting table with Obama officials saying that these cuts aren’t happening next to the names and dates of the companies making the cuts.

Given what it claims is the Obama Administration’s poor track record on employers’ responses, Unite Here is also suspicious that many employers will drop their health insurance benefit and pay the $2,000 penalty. It asks, why would an employer in the hotel industry provide a benefit costing $8,000 to $12,000 when they can simply pay the penalty and let the employee obtain insurance on the exchange?

Logically, the organization concludes that “the hospitality industry will face labor strife, Unite Here members from around the nation will face pay cuts to keep good coverage, and the funds that deliver innovative care to thousands of service workers will be destroyed.”

Is the ACA working? Mostly not, and the American people know it, and say so to pollsters.

Eric B. Dent , a Lumberton resident, is a business professor at Fayetteville State University.


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