1. Maser 1
Connor Maser
Essay Topic 1
43rd Retirement & Benefits Management Seminar
USC Moore School of Business
March 20th, 2014
The Affordable Care Act: A Problematic Solution
On March 23, 2010, President Barack Obama signed the Affordable Care Act into law.
This healthcare overhaul sent a shock through the country. Thirty to forty years ago, legislation
like this would more than likely have been turned down due to the fear of the spread of commu-
nism. Fortunately that fear fell, along with the Berlin Wall and the Soviet Union. Currently the
new social tension in the United States is socialism as it pertains to healthcare; businesses and
individuals debate about whether or not the government should control this aspect of life. With
the implementation of the Affordable Care Act, the move has been made for greater government
intervention. Apart from the legislation, Medicare accounted for a significant portion of the
country’s healthcare spending. The bargaining power held by the government will not be enough
to leverage the issue of medical costs in a fiscally and socially appropriate manner. Healthcare
service, whether $0 or $1,000,000 is demand inelastic, meaning that regardless of the cost, peo-
ple will pay for it. Small business owners along with young, healthy adults face significantly
larger premiums than they otherwise would have prior to the legislation. The government holds
that the premiums will offset the higher risk enrollees, but what about under-enrollment of those
individuals and businesses? The only plausible way to account for lost funding is taxation.
Businesses are one of many examples that show how increased taxation due to this law can be
detrimental. Local employers and corporations alike are cutting employee hours to keep employ-
ees under thirty hours (full-time). The costs of the Affordable Care Act will not be sustainable or
affordable in the long-run; this legislation needs to be remitted.
The Affordable Care Act raises the key social issue of socialism with respect to health-
care in the United States. Make no mistake about it: the healthcare system in the United States
encompasses big business. One glance at a billing statement from an emergency room visit will
reveal this. The breakdown of the bill is inconceivable. Nurses, anesthesiologists, trauma doc-
tors, ambulance transport, supplies, and many more itemizations make the list. Positive contri-
bution margins fill the financial statements of pharmaceutical companies, hospitals, orthopedists,
and the like. On behalf of the public, the government argues that the A.C.A. will bring the costs
of medical coverage down and ultimately insure the uninsured of the United States. Business
tensions arise in the form of significant increases in overhead costs, which shareholders will feel
as their return on investment decreases. In addition, increased taxation must be utilized by the
government in order to fund universal coverage. This then leads to another social tension of
augmenting the current debt of the United States. As of now it heralds at a cool $17 million.
The deeper social tension is whether or not access to sufficient healthcare is a right. Access to
healthcare is defined as a second generation positive right. Never does this right appear in the

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Constitution or Bill of Rights of the United States. So how will ‘Big Brother’ pay for this
healthcare?
The government does not have a problem writing checks for Medicare, Medicaid, Social
Security, and many other federally sponsored programs, so there is no reason to stop now. Let’s
hone in on Medicare as an example. According to an article from the New York Times, current
government expenditures in healthcare outpace overall economic growth (Davidson). That is not
a very reassuring statement. Another study showed that one third of healthcare spending is from
Medicare (DeParle). Such a percentage provides a significant amount of leverage for the gov-
ernment; it is through this leverage that the government wishes to purchase healthcare for nearly
40 million seniors (DeParle). However, this will come to no avail due to the inelastic demand of
healthcare.
As stated earlier, no matter the cost of healthcare, if an individual needs it, whether $0 or
$1,000,000, they will pay for it. Picture a graph of the number of insured citizens on the inde-
pendent axis and the price of healthcare coverage on the dependent axis. With the United States,
say the current amount of insured citizens is 150 million. What the Affordable Care Act attempts
to do is increase that number drastically. The line representing the number of newly insured citi-
zens after the healthcare reform shifts the straight line from 150 million to, say, 225 million. The
line did not change in steepness because the demand for healthcare is perfectly inelastic. Also to
add, a person is either insured or uninsured, which adds to the straight and perfectly inelastic
characteristic of the demand curve. Continue to imagine this; now let’s move on to the supply.
This is not perfectly inelastic; the supply curve for healthcare, more than likely, is unit elastic, a
45 degree line rising to the right. The combination of these two curves and the shift in demand
due to the implementation of the A.C.A. results in increased prices. This theory is very basic but
also a principle of economics which has led many Federal Reserve Chairmen in the past. The
A.C.A. will only worsen the fiscal standing for the United States in its attempt to control health-
care. The government realizes this as the employer mandate continues to be pushed back a year
from now, and two years for businesses that employ 50-99 workers. Even as the natural rate of
unemployment increases, Republicans state that the A.C.A. encourages cutting hours and layoffs
(Good). An earlier article of the A.C.A. states that affordable coverage will be provided for
small businesses and individuals. That is a bald-faced lie. After speaking with a Sales Represen-
tative of Blue Cross Blue Shield of South Carolina, it came to the light that coverage was either
cancelled or renewed at a greater or even astronomical rate (Yanek). In another interview, Steve
Sanborne, a leading health insurance sales executive in New Jersey, said that there were increas-
es in premiums anywhere from 50-120% for individuals and small business (Sanborne). This
simply is not the solution.
With higher costs of healthcare, the Affordable Care Act puts businesses in a bind that
does not help in complying with fiduciary duties to their shareholders. Apart from layoffs, cut-
ting hours, or increasing job responsibilities, there is a preposterous but necessary tactic out their
utilized by business owners and managers. That tactic is called the ‘Affordable Care Act’ sur-
charge (Luhby). Gator’s Dockside, a restaurant chain in Florida, uses a 1% surcharge on the to-

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tal bill in an attempt to offset the cost of the A.C.A. (Luhby). The article states that compliance
costs would cost somewhere in the ballpark of $500,000 (Luhby). Disappointingly, the group
director of operations, Sandra Clark, estimates that the company would be lucky if the surcharge
generated an additional $160,000 in revenue (Luhby). This would still leave them $340,000
short. Such a deficit faces not only the franchise owners of Gator’s Dockside, but millions of
comparable small businesses throughout the country. Small businesses are the backbone of em-
ployment in the United States, from small locksmiths to individual insurance agencies. In the
end, employees of small businesses, even those employed by business of less than 50 employees,
exempted from the employer mandate, will have to find coverage through the Exchange via the
Small Business Health Options Program (SHOP) due to the Individual Mandate Policy. Then the
government must face the problem of under-enrollment of young, healthy adults versus higher
risk enrollees, i.e. those over forty years old. Republicans argue that the above issue will drive
up premiums for the older population and cause policy cancellations, and that it will increase
costs for many businesses (Pear). All of this is already happening.
Ultimately, even good intentions cannot solve the messy healthcare system of the United
States, especially when the government is the body mitigating them. Even though medical costs
are high in the United States, the prowess and advancement of the medical sector is second to
none. The United States is where nations send their diplomats and higher-ups for medical treat-
ment. The country is also where foreigners come to study medicine at schools such as the Uni-
versity of Pennsylvania and Harvard, along with many others. Instead of a complete overhaul of
the healthcare system, the government should have created an incentive based program that re-
wards hospitals for keeping specific costs such as administrative costs or supply costs down. All
the A.C.A. has done is add a burden to the overall debt of the country and business owners, along
with individuals who power the economy of the United States.

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Works Cited
Davidson, Adam. "The President Wants You to Get Rich on Obamacare." The New York Times.
The New York Times, 02 Nov. 2013. Web. 11 Mar. 2014. <http://www.nytimes.com/
2013/11/03/magazine/the-president-wants-you-to-get-rich-on-obamacare.html?
action=click&module=Search®ion=searchResults%230&version=&url=http%3A%2F
%2Fquery.nytimes.com%2Fsearch%2Fsitesearch%2F%23%2FThe%2BPresident%2B-
wants%2BYou%2F&_r=0>.
DeParle, Nancy-Ann, JP Morgan Partners LLC, and The Wharton School. "Building a Better De-
livery System: A New Engineering/Health Care Partnership." Building a Better Delivery
System: A New Engineering/Health Care Partnership. National Academies Press, 1 Jan.
2005. Web. 13 Mar. 2014. <http://books.nap.edu/openbook.php?
record_id=11378&page=227>.
Good, Chris. "Small Businesses Get One-Year Reprieve From Obamacare ‘Employer
Mandate’." ABC News. ABC News Network, 10 Feb. 2014. Web. 16 Mar. 2014. <http://
abcnews.go.com/blogs/politics/2014/02/small-businesses-get-one-year-reprieve-from-
obamacare-employer-mandate/>.
Luhby, Tami. "Restaurants Charging Obamacare Fee." CNNMoney. Cable News Network, 27
Feb. 2014. Web. 16 Mar. 2014. <http://money.cnn.com/2014/02/27/news/economy/oba-
macare-restaurants/>.
Pear, Robert. "Health Care Enrollment Falls Short of Goal, With Deadline Approaching." The
New York Times. The New York Times, 11 Mar. 2014. Web. 16 Mar. 2014. <http://
www.nytimes.com/2014/03/12/us/almost-a-million-more-sign-up-for-health-coverage-in-
february.html?_r=0>.
Sanborne, Steve. "New Jersey Health Insurance Executive." Personal interview. 19 Mar. 2014.
Yanek, Steven. “BCBS: Effects of Health Reform on Individuals and Small Business.” Personal
interview. 18 Mar. 2014.