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The Obama Administration released a shocking decision on Tuesday night to delay the Obamacare employer mandate requiring U.S. companies to provide health insurance to employees who work more than 30 hours a week and are part of a workforce of more than 50.
Mark Mazur, the Assistant Treasury Secretary for Tax Policy, announced on the Treasury Departments blog that the Obama administration "will provide an additional year before the ... mandatory employer and insurer reporting requirements begin."
Despite the significant decision by the administration to delay the business mandate, the individual mandate (recently ruled Constitutional as a tax by the Supreme Court), will go into effect as scheduled. Individuals will need to provide proof of insurance in 2014, whether or not there is a business mandate.
The Obamacare mandate is likely a political move in order to delay any negative economic impact of the law on the economy, particularly unemployment, in advance of the 2014 Congressional election that could harm Democrats.
For investors, the financial impact will be just as significant and opportunities robust in the near term. Expect the markets to react accordingly over the next few days.
Significant Political Implications Await Ahead
The political implications of the Obamacare mandate delay are significant, since the financial costs associated with the mandate now are expected to hit businesses after the 2014 elections.
Given the economic reality that Obamacare drives up the cost of labor on U.S. companies, it will drive up the unemployment rate and encourage companies to reduce the total hours of employment for workers to get them under 30 hours per week so they wouldn't have to provide Obamacare coverage.
The mandate delay could slightly reduce these incentives for another 12 months.
Former Congressional Budget Office director Douglas Holtz-Eakin, a Republican, dubbed the announcement "deviously brilliant," since the negative repercussions of the bill are likely to be delayed until 2015, thus shielding Democratic Senators and Representatives seeking re-election from the law's repercussions among their constituents.
Should Obamacare's problems continue to mount, this could provide Republicans with significant anti-government healthcare rhetoric in the 2016 election.
However, the Democratic presidential nominee in 2016 could potentially push for a single-payer government system (the desired liberal healthcare outcome). This would give them given the ability to blame "insurance corporations" for the increased financial and social costs rather than government over-regulation and over-reach.
Here's one irony of President Obama's decision. Individuals will be under the mandate to have health insurance over the next year while employers are not legally bound to provide healthcare.
This could lead to a significant decline in healthcare coverage across the country. Democrats then might seek to blame companies for leaving Americans to fend for themselves against the individual mandate. This has the potential to unravel the employer-sponsored mandate and thus the system of Americans receiving their healthcare through employer programs.
The liberal solution to liberal consequences is always the centralization of power and authority, and in this case it will be single-payer government run system that will appeal to them. This is so predictable one can see it from two elections away.
Remember there is more to politics than meets the eye. For every action, there is a reaction. Policy decisions aren't decided until every specific outcome is explored, and exit strategies and arguments justifying unintended consequences are planned.
What the Obamacare Delay Means for Investors
Despite the political costs of this ongoing battle between the market and centralized planning, the impacts on the market have the potential to be equally profound.
The largest publicly-traded sponsors of employer-based health programs will likely take a bit of a hit over the next few days. Companies like Cigna (NYSE: CI), WellPoint (NYSE: WLP), UnitedHealth (NYSE: UNH) and Aetna (NYSE: AET) could see some push back as the delay affects the Obamacare mandated use of their products and services from the ruling.
Should the employer mandate fizzle or face total repeal, stocks could see sharp gains since the investors would perceive Obamacare sinking under its own weight.
The Obamacare employer mandate should be eliminated, and the market should be liberalized in order for individuals to purchase their own insurance, while avoiding the public option. As I noted on my trip to Argentina, a public option would only destroy the private markets. Still, the employer mandate will likely continue to fizzle in the future, possibly leading to its repeal.
Should the mandate be repealed, the largest insurance sponsors would take a significant hit. Investors in these stocks should seek some long-term protection on their positions in the event of repeal or future delays of the mandate heading into 2015.
Given that the sector is trading on the expectation of mandated use of its products, any future changes to this law will erode shareholder confidence as public outrage on both sides of the aisle begins to build.
The economic repercussions of the Obamacare employer mandate are just a small part of the growing collection of frightening Obamacare truths. Find out the scariest Obamacare facts here.
About the Author
Garrett Baldwin is a globally recognized research economist, financial writer, and consultant with degrees from Northwestern, Johns Hopkins, Purdue, and Indiana University. He is a seasoned financial and political risk analyst, with a focus on stocks, hedge funds, private equity, blockchain, and housing policy. He has conducted risk assessment projects for clients in 27 countries, and consulted on policy and financial operations for some of the nation's largest financial institutions, including a $1.5 trillion credit fund, a $43 billion credit and auto loan giant, as well as two of the largest Wall Street banks by assets under management.
Garrett joined Money Map Press as an economist and researcher in 2011, specializing in alternative strategies with an emphasis on fundamental and technical analysis.