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Taxes on Consumers and Employers Will Determine the Fate of Obamacare

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The taxes, which are penalties for not buying insurance, would cut costs significantly and make Obamacare's benefits possible. However, they face a tough political road ahead.

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Their perspective is that younger Americans with fewer medical problems will decline to enroll, because a $95 or even a $300 fee is likely a fraction of what they would otherwise pay for coverage. And there may be a reason for that decision. In the past, a healthy twenty-something could buy "catastrophic insurance" for a very low monthly fee. Under the new law, they would have to buy a more expensive policy, which helps pay for the new class of insured, including those with chronic diseases.

New payments from healthy individuals who don't need medical services would in theory enable insurance to be cheaper for everyone. So it's not just about how many people enroll in health insurance, but who they are.

"These first couple of years are going to be critical," explained Robert Zirkelbach, a spokesman for America's Health Insurance Plans, the association representing the industry. "If only older people buy coverage in the first couple of years, then the cost of coverage becomes less affordable."

If the program does not control costs, then the benefits promoted by Obama won't happen.

On the corporate side, it can be confusing just which companies would be hit with a penalty. Only companies with more than 50 full-time employees would be required to provide health insurance, or pay a $2,000 per person penalty fee.

The penalty would not apply to the first 30 employees, so this would mean the fee would starting being assessed on the next 20 workers and be at least $40,000. For many, that could be a drop in the bucket. The average cost to insure a family of four for a year is 20,000. Based on CBO projections, the tax would generate $5 billion next year and a total of $150 billion in the decade to follow.

The Hudson Institute, a conservative think tank, calculated in 2011 how many International Franchise Association members would face a penalty. Almost 60% would not, since the vast majority of their members own one or two locations. But the penalties would likely start for a franchise business that controls more than three-for example-McDonald's (NYSE:MCD).

For 63 franchisers who own more than 250 stores each, their bills could exceed $8.5 million and in total would account for $2.5 billion in fees.

But the wildcard is who counts as a full-time employee. Obamacare defines it as anyone with a 30-hour workweek-and employers are using this year as a look back to determine how many of their workers count as full-time over the course of six months to a year, since shifts can vary during busy seasons.

This could mean that more workers find themselves stuck with fewer hours.

"The intent was to cover a lot of people under the law by making the definition 30 hours," said Thorson at the International Franchise Association. "The unintended consequence is a shift in employment-not just with our members-toward part-time. Businesses that have to manage their costs are going to have to look at that option."

Editor's Note: This article by Josh Boak originally appeared on The Fiscal Times.

For more from The Fiscal Times:

The Cost Explosion of Obamacare Begins to Hit Home


10 Worst States in the US for Taxes

Chained CPI Could Raise Taxes on Lower Middle Class

Follow The Fiscal Times on Twitter @TheFiscalTimes.
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