Sticker shock
Figures released by the state of California may indeed send shocked middle-class consumers back under their covers never to emerge again. If you recall, California unveiled a four-level pricing tier of platinum, gold, silver, and bronze. The higher up the scale you go, the lower the out-of-pocket costs will get — but the higher the monthly premium will become.
The silver package, for example, will boast an average monthly premium of $321, an annual deductible of $2,000, a doctor visit copay of $45, and maximum out-of-pocket costs for individuals of $6,400! To put it another way, even if you don’t visit a doctor during the year with the silver package, you’ll be spending an average of $3,852 on premiums… annually! That’s quite the sticker shock for middle-class individuals who could have purchased a catastrophic or bare-bones plan last year for somewhere in the neighborhood of $100-$150 a month, or perhaps even cheaper, in California.
Walking the fine line of full-time employment
If middle-class individuals were working full time, this might not be as much of a problem, but job and hour cuts stemming from the upcoming implementation of Obamacare are becoming all too common. Surgical device maker Stryker Corporation (NYSE:SYK) — which would be expected to pay higher wages because of the specialization often required to work in the health care industry — let go of 5% of its workforce in direct response to the higher costs associated with the PPACA and its 2.3% medical device excise tax.
Other companies, specifically in the service industry — which pay a broad spectrum of wages — have also been cutting jobs and/or hours in direct response to Obamacare. Movie theater chain Regal Entertainment Group (NYSE:RGC) cut thousands of workers’ weekly hours to 29 or less in order to exempt itself from having to provide them health care. Companies in excess of 50 employees are required to provide access to health care for their employees and could be asked to step in and help if the cost of health care exceeds 9.5% of that employee’s income. Sure, a worker whose hours are cut back from 40 to 25 may be eligible for bigger health care subsidies, but at what cost? They’ve just lost 15 hours of weekly pay on a regular basis as a direct cause of Obamacare’s upcoming implementation, which will affect countless other aspects of their life beyond health care!
Say goodbye to tax breaks
The final crushing blow to the middle class comes in the form of a higher adjusted-gross income tax allowance. For those with high medical costs and the ability to itemize, they have been able to deduct medical expenses once they topped 7.5% of adjusted gross income. The PPACA is going to bump that itemized target level to 10% of AGI, making it difficult for middle-class individuals to receive this tax break if they do have extra medical expenses during the year. As I profiled previously, middle-class families will also see flexible-spending accounts capped at $2,500 per year. These accounts are often used to help pay for special education needs with pre-tax dollars.
Is the middle class doomed?
It might be a bit premature to say that the middle class is doomed, but I think it’d be pretty fair to assume that a good chunk of the middle class is in for a rough road over the next couple of years. While the more comprehensive coverage being implemented with the PPACA will result in higher quality care, it comes at the steep price of higher premium costs for the lowest-priced plans for the middle class. Many people already have to cope with less take-home pay because of higher taxation, and soon they may also be dealing with potentially fewer itemized medical deductions.
Upper income-earners may be crying wolf from this, but it’s the middle class that looks like it’s getting the short end of the stick when it comes to Obamacare. If hours get shaved and disposable income drops significantly, we could have a serious problem on our hands from a retail sales/consumption perspective, and even health-benefits providers like WellPoint, Inc. (NYSE:WLP) and CIGNA Corporation (NYSE:CI) may struggle to attract new business. Although, only time will tell if this rings true.
The article Will Obamacare Deliver a Crushing Blow to the Middle Class? originally appeared on Fool.com.
Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.The Motley Fool owns shares of, and recommends, WellPoint, Inc. (NYSE:WLP).
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