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Wednesday, February 06, 2013

Will Obamacare encourage more business to "go protean" ?

What does "go protean" mean? See here for this WSJ article on the phenomenon. Basically a business would outsource many of its functions to other corporate entities, not to individual contractors, which is often what out sourcing means.

Quoting WSJ:

 " Like a protozoan single-cell organism, the protean corporation has the ability to "shape shift," rapidly adapting to internal and external forces in the market and the company. At the heart of a true protean corporation is a tiny number of core employees surrounded by a large cloud of resources, generally contracted or outsourced talent that does most of the work."

To get under the fifty employee ACA head count threshold, a business might ofter that some of its employees form a corporation and then contract with that business to do whatever functions at that business. Now you have one corporation doing business with another and there is no longer the employer-employee relationship which is one that is controlled and regulated in many ways by local and federal governmental entities (e.g.OSHA,Fair Employment laws of various kinds,Etc)

H/T to Michael Cannon at Cato who closed his commentary on this issue with this:See here for his entire comments.

"Keeping the core company below 50 full-time employees will allow such companies to avoid the employer mandate. But it will also drive up Obamacare’s cost, because most of the workers in the new corporate entity will be eligible for government subsidies through the  health insurance “exchanges.” This will drive up the cost of Obamacare wherever those subsidies exist."

The list of unintended consequences of Obamacare continues to grow.The protean corporation scheme may or may not catch on,and the IRS or some other governmental entity may or may not have some regulatory counter move and since folks respond to incentives we can expect to see more ways for businesses to avoid or minimize the effects of Obamacare and counter moves by the government.The IRS has already issued proposed rules to restrict some of the self  protective actions of businesses in regard to how full time employees are counted and how to calculate full time equivalents.

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