Obamacare – A Huge Benefit to American Corporations? Could It Reverse the 40-year GMization?

Obamacare is a big deal. Anything that could lead to an intensely emotional shut down of the U.S. Government has to be a very big deal indeed. The polarization in America is not just on party lines but on racial lines as well, according to CNBC’s John Harwood. As he told President Obama this week, Obamacare is “very, very popular among African-Americans, marginally popular among Hispanics, very unpopular among whites.”

However, as the New York Times pointed out, the implementation of Obamacare “will leave out two-thirds of the poor blacks and single mothers and more than half of the low-wage workers who do not have insurance, the very kinds of people that the program was intended to help. While there medical plans such as IEHP which are made specifically for low-income families (source: https://www.iehp.org/en/members/medical), Obamacare is supposed to be their go-to solution. So if Obamacare does not end up helping America’s poor & uninsured, whom would it help? Those who are not helped under Obamacare should visit insurance quote in order to find the right coverage.

In this article, we step away from the cacophony of intense mainstream debate about Obamacare and look at what actually might happen. When we do that, we come to a completely different possibility – that Obamacare, designed to help the neediest of Americans, could end up as a huge even a revolutionary benefit for America’s largest corporations at the expense of American middle class.

1. GMization of American Business – a look back

The process we call GMization began in early 1960s when American society was at its zenith. America was the predominant economy on earth and the American family was the richest family in the world with the best & most comfortable lifestyle. As we wrote back in 2010,

  • “The lean mean low cost society was fine when America was growing up but as the unquestioned leader of the world, American society wanted higher, more moral standards. This is when “this should not be so in America” or “this should not happen in the richest country in the world” psychology began to prevail”
  • “America began a slow journey of creating an increasing level of “rights” and mandating an increasing amount of benefits for America’s citizens. … Taking care of workers was codified as the social, patriotic duty of America’s corporations. This process began in the 1960s and it continues to unabated to this day.”

This process converted the lean mean & nasty machine called General Motors into an entity that was derided in 1990s as first a healthcare provider and then a car company. This process that we call GMization affected every American business. American businesses were forced to direct their spending towards employee benefits rather than towards wages, a process that led to stagnation in wages over the past decades. These days, some businesses decide to incorporate different software and methods that will allow them to easily distribute and calculate their employee’s wages. For example, this timesheet can helps track staff time and will give them the right amount of money for how many shifts they have worked. This wouldn’t have been done before, especially with the stagnation in wages.

The GMization process reached its pinnacle when the American corporation became a guarantor of life’s benefits for its employees – health care, insurance and retirement pensions.

2. The First Change

The first reversal of the GMization process was in pensions. America’s corporations simply could not afford the unlimited, unquantifiable, life long expenses of their retirees. American business was forced to fund its pensions obligations over investing in expansion, new product development and research. Finally American corporate sector began moving its employees from its defined benefit pension system to a defined contribution system.

This was a major restructuring. American corporations became responsible only for a quantifiable, limited amount of spending on employee retirement. The huge risk of surviving in retirement years on a limited income was fully transferred to the employees, though people are able to get help to cover the cost of living with retirement benefits from the Social Security office in Ohio, or the office nearest to them. The full impact of this restructuring will become evident in the next decade when the majority of baby boomers will retire with inadequate retirement assets & inadequate income. And American society will have to pick up the tab or deal with the consequences, not America’s corporations.

This restructuring, this partial reversal of GMization was painful but not uncomfortably so. After all, retirement is a problem to be faced in the future. So the pain for the employees remained at an intellectual level. Health care will be very different.

3. Obamacare – A complete reversal of GMization?

Obamacare went into effect this week on October 1. Look what Corporate America has already done. Walgreens has announced plans to transfer 160,000 employees from its current health care employee plan to an Obamacare health exchange. Walgreen will reportedly pay its employees money to buy health benefits from this health care exchange. Other large employers like Sears & Darden restaurants have also signed up. Home Depot has
reportedly decided to transfer it 20,000 employees to an Obamacare
exchange. IBM & other blue chip companies have announced plans to
transfer its retirees to Obamacare exchanges.

Just think what this means to a large employer like Walgreens. Its health care expenses now become limited, quantifiable and its liability has been capped. Walgreens has now transferred the huge risk of adequate health care coverage to the employees themselves. And Walgreens is no longer responsible for quality or affordability of health care. That falls on the Obamacare exchange & the employees.

This is a huge restructuring benefit and it begins accruing immediately in 2014. This is a win-win formula for America’s corporations and for Obamacare exchanges. America’s corporations want Obamacare to be successful because they can then dump their entire health care liability onto those exchanges and the exchanges need massive numbers of members to be financially viable, massive numbers that only large American employers like Walgreens, Sears, Home Depot can deliver.

If successful, Obamacare may therefore end up as the greatest single gift from an American President to American corporations.

4. Result – Greater Inequality, Lower Care?

Does anybody believe that senior executives at Walgreens, Sears, Home Depot, IBM would give up their own health care coverage and join Obamacare? In fact, we expect just the opposite. Once large American corporations dump their rank & file including middle management into Obamacare exchanges, they would be free to offer a far higher level of health care coverage to its senior executives. We would expect premium concierge like health care services to become norm in American boardrooms and c-suites.

This is already the norm in retirement benefits and in restricted stock grants. While the rank & file including middle management work for stagnant wages, the C-Suite enjoys huge stock grants and plush retirement benefits. Now this practice will also include concierge level health care while the vast majority of employees live under restricted health care in Obamacare exchanges.

Those who don’t believe that Obamacare will end up “rationing” should hear CEOs of major hospitals discuss their plans under Obamacare. They tell you frankly that Obamacare is essentially a highly restrictive HMO style program that will deliver a “rationed” level of health care while charging high deductibles. This is the only way an Obamacare exchange will be financially viable.

Thus Obamacare will, we think, increase the divide in American society. Health care was one area where a middle class or poor American received a level of service similar to a much richer American. Obamacare will end that.

So a program launched with the best intentions of providing health care to America’s needy might end up as a program almost tailor-made to provide huge benefit to America’s largest corporations & their stockholders while relegating middle class Americans to a much lower, more restrictive level of healthcare.

With pensions already a thing of the past and now with Obamacare potentially removing health care liability from America’c corporate shoulders, American society may be about to completely reverse the process we call GMization of American Corporations.

In other words, President Obama might finally have emulated President Reagan by launching a new bull market in corporate profitability. Great news for shareholders. For middle class America, not so much. At least not until increased corporate profitability leads to strong job creation in America.

Editor’s PS: There is a great dialog in McLintock, (the 1963 film about a Cattle Baron played by John Wayne) between an unemployed young man desperately looking for a job and John Wayne. We urge all to watch 55 seconds of the clip below from 20:40 to 21:35.

(watch from minute 20:40 to 21:35)

That promise of a fair day’s wage for a fair day’s work might come back to the American workforce but with American society taking care of family needs like health care & retirement rather than America businesses doing so.

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