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Member Questions of the Week of January 18, 2010

Craig of Newport Beach, CA asks: Will the current Federal Reserve policies of easy money lead to runaway inflation? OUR ANSWER: The issue is very uncertain, with respected economists having different views some say “no,” some say “yes, but not for a while,” and some say “yes, and hyperinflation is a probability.” Heritage analyst J.D. Foster believes that inflation will accelerate, possibly to a high level by recent standards (even 5 or 6 percent), and will do so much sooner than markets or policymakers anticipated. He also thinks that the Federal Reserve will recognize its mistake before too long, and then move aggressively, successfully, and painfully to bring inflation back under control.

Foster has two papers nearing completion addressing this very important question, so check Heritage.org soon to find out more.

Jeannette of Soldotna, AK tells us: I am signing up for this information so I can defend myself in my college class! OUR ANSWER: Jeannette, we are so glad that our research can be of use to you. We have information on a wide variety of topics health care, taxes, education, homeland security and hopefully they can provide you with the research and fodder you need to teach your professors and classmates about conservative principles.

Mark of Marble Falls, TX asks: How will the health care legislation in its present form affect employers with less than 500 employees who have high deductible health plans paid by the employer? OUR ANSWER: There are currently two main health care billsone that has passed the Senate, and one that has passed the House. The House-passed bill includes an employer mandate, a requirement that the employer must buy health insurance for their employees, and an incremental payroll tax on employers that fail to do so. This tax starts at 2% for employers with total annual payroll of $500,000 and increases to 8% on total annual payroll of $750,000 or more. This tax would affect all employers, even those with 25 employees or fewer, since it is based on total payroll, not number of employees.

The Senate-passed bill also has an employer mandate. The bill requires companies with at least 50 employees who do not offer qualified health plans as defined by government bureaucrats to pay a tax of $750 per full-time employee if even one worker receives a subsidy through the exchange. To further confuse matters, an employer who does offer qualifying insurance must pay a penalty of $3,000 for each employee who qualifies for and accepts a premium subsidy in the “health insurance exchange.” The employer’s total penalty is capped at $750 times the total number of full-time employees, which, if more than a quarter of the employees receive the subsidy, is the same as their penalty would be even if they didnt offer insurance at all.

As for offering a high deductible plan, both the House and Senate bills erect massive federal controls over private health insurance, dictating the content of insurance benefit packages which could affect the use of medical treatments, procedures, and medical devices. They subject virtually all private health insurance, whether purchased from an insurance company by employer groups or individuals, or provided through a self-insured employer or union plan, to detailed federal regulation. For more answers on how businesses will be affected by Obamacare, see the Heritage Fact Sheet on the topic, or read our papers on the House and Senate bills.

Other Questions