Obamacare’s Premium Subsidies Will Stifle Small Business

As small business goes, so goes the economy. They have been responsible for creating almost two-thirds of all net new jobs over the last 15 years. Indeed, one reason Obamacare is such a concern is that it will significantly reduce the incentive for small businesses to hire. Especially once the premium subsidies become available in 2014.

The premium subsidies are Obamacare’s way of making health insurance more affordable for low-income earners who buy coverage in the new exchanges. Eligibility for a subsidy is limited to people who lack public or employment-based insurance and have incomes less than four times the poverty level. The values of the subsidies are set so as to limit the amount one contributes towards insurance as a percent of income.

The actual implementation, however, is complex.

Say you’re under 65 and not on Medicaid (or CHIP), and the year you would be eligible to purchase insurance through an exchange is 2014. Your premium subsidy is determined by your income and family structure from two years earlier (in this case, 2012), applied against the poverty level for the calendar year in which you purchase the insurance (2014).

The consequences of this complicated formula are far worse. (more…)