Millions of Americans have been watching our federal government wrestle with the Affordable Care Act, also known as Obama Care. One side is touting the need for major medical reform that will insure millions of people who currently do not have coverage. They have produced hundreds of commercials and held countless press conferences speaking to our need for humanity and sensibility.
The other side of the aisle is totally opposed to the Act as it is written, because it places the cost burden on those who are already paying for coverage. Plus, the plan is so complex that it required more than 1,000 pages in the documents that define it. The opposing side claims it may become the worst economic decision in our country’s history.
I worry every time the government sticks its nose into economic areas. We have absolutely no proof that our government can manage business, insurance or money as well as the private sector. We have been told by Washington that we will have better coverage, lower co-pays, lower deductibles and that more people will be covered for less money. And let’s not forget the president’s promise that if we like the coverage we currently have, that we can keep it. This sounds pretty good.
As the diatribe continued in the press, and the rhetoric out of Washington reached new levels of acrimony, I couldn’t wait for my increased coverage and lower rates – but that hasn’t materialized.
I’ve checked with Covered California and spoken to my current insurance company. The bottom line is that my premiums are increasing 76 percent, my deductibles are going up, my co-pays are higher and my family out-of-pocket maximum is a lot higher. There is one positive note, my 50-plus-year-old wife will now have maternity care, thanks to the new law. Upon this revelation I did inquire about keeping my current plan, which the president promised, but was told the plan was not grandfathered and I would need to select one of the new ACA conforming plans.
As a broker, almost every real estate transaction we touch involves the buyer’s ability to afford the payments. Since the great foreclosure debacle of 2007-10, lenders are very sensitive to affordability and we have new laws coming next year to assure affordability. It doesn’t take a rocket scientist to know that if people have less money to spend due to higher health care premiums, they will have less to spend on a house, a car, food or anything else.
Let’s look at the economics: There are 40,955 people in Morgan Hill and 50,660 in Gilroy. This translates to about 28,300 households.
If every household had the same increase as I’ve experienced, that would be 28,300 households x $600 per month, which equals $16,980,000. On an annual basis, that’s $203,760,000. That’s based on my situation so let’s reduce the numbers based on a few assumptions: No.1. Many get their insurance through their employer; No. 2. Some people will get federal subsidies. Since we don’t have exact numbers, let’s presume that 50 percent get some assistance. That would cut everything in half (28,300 households at $300 per month in increased premiums), which translates to $102 million extra per year spent on insurance.
Think about that. Potentially $102 million LESS per year spent on houses, cars, food, clothing, Starbucks, etc. – and that’s only in Morgan Hill and Gilroy. Imagine the statewide effect: Even if my numbers are 75 percent high, it would still take $54 million out of the local economy.
I can hear the naysayers. “I get my insurance at work so this won’t affect me.” OK, let’s do the math again: Let’s presume you work for a company that employs 40 people. The employer pays 100 percent of the premium and it increases by $300 per person. (Again, this is only half of what I’m experiencing.) Forty people x $300 per month equals $12,000 X 12 months equals $144,000. Your employer must decide whether they can swallow the extra $144,000 per year, request that employees contribute into the insurance costs or simply reduce employees to offset the increase. Either way, it’s less money that cycles into the economy.
The bottom line is that when people spend less, merchants receive less. When merchants receive less, they reduce staff to meet the demand and now there are fewer people earning wages and spending money.
I’m not taking sides as to which political party has this right. My concern is simply what the effect will be on the economy and how that will affect everyone. I believe that our health care system needs reform, and that the poor and underprivileged are deserving of consideration. What I’m not convinced is that the ACA is a means to that end. I also do not believe in Santa Claus, the Easter bunny or that government oversight and intervention will get more people better coverage for lower premiums. The math just doesn’t work.
Lee Schmidt is the broker/owner of Realty World South County and can be reached at 782-9933 or [email protected]. Send your real estate questions to him and they could appear here.
