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  • Side Effects: Small Businesses Won’t Find a Friend in Obamacare

    One of the promises of Obamacare was that it would give folks working in small businesses access to affordable care. Unfortunately, like so much else in the law, it doesn’t look like that’s going to work very well.

    To solve the problems small firms have with finding affordable health coverage, Obamacare created a small-business tax credit.  But there’s less to this credit than meets the eye.

    A recent study by FamiliesUSA shows that only one in four businesses employing 25 or fewer employees will get the full credit—and one in six will receive absolutely nothing.  Moreover, the credit is reduced whenever a firm adds workers or raises wages—so it actually provides as a perverse incentive not to hire or give raises.

    The bottom line, according to Dr. Bob Graboyes, senior healthcare advisor for the National Federation of Independent Businesses:  the credit will do little to help small business.

    Other provisions will actually harm small firms.  The employer mandate requires non-insuring firms with 50 or more workers to pay a $2,000 penalty per employee.  New insurance requirements will make it more difficult for employers to offer attractive, affordable insurance options.  And the new requirement to file a 1099 form for every vendor paid more than $600 in a year will sink small-business owners even deeper into the morass of nonproductive paperwork.

    In short, Obamacare will be make life far more difficult for small firms and their employees.  At a recent NFIB event, entrepreneurs started talking about how Obamacare will affect their day-to-day operations.

    There was Scott Womack, owner of 11 IHOPs.  Currently, he offers his 45 managers health insurance. His restaurants run on 4-7 percent profit margins, so providing health insurance for all employees simply isn’t feasible. Indeed, the Obamacare penalties will exceed his profit margins.  To stay in the black, he’ll have to “minimize the number of actual full-time employees…. It’s going to make it harder for us to hire.”

    New Jersey business owner Joe Olivo noted that his health care cost increases average 20 percent a year, yet he’s been able to cover all of his employees and 78 percent of their dependents by setting up high deductible plans with health savings accounts for his workers. Obamacare may make this option no longer viable.

    Eric Oppenheim manages 20 Burger King restaurants in the D.C. area. Oppenheim said health care costs for his employees would be two times his net cash flow. Obamacare won’t make it possible for Oppenheim to offer care, but it will cause him to reduce work schedules, cut benefits, and pay the penalties for not providing care.

    Obamacare will tie the hands of these and other small business owners.  It’s a lousy way to treats America’s job generators—especially in the midst of a recession, when we need all the jobs we can get.

    Joshua Wade and John Scot Overbey contributed to this post.

    Posted in Obamacare [slideshow_deploy]

    12 Responses to Side Effects: Small Businesses Won’t Find a Friend in Obamacare

    1. Pingback: Healthcare reform penalizes and disincentivizes small business | Gunbarrel Teleprompter | Gunbarrel, Colorado

    2. Pingback: It’s All About Confidence Stupid

    3. gerald mayes says:

      Where can I order a bound hardcopy of the final health care bill for my use?

    4. Eugene Shmorhun M.D. says:

      I am a Family Physician and small business owner. I am very concerned about health care costs and our dysfunctional delivery system and would like to learn more about what your are doing at the Heritage Foundation.

      I can't stand on the sidelines and let the politicians mess this up any more so I'm looking for a way to get involved. Can you contact me or direct me to someone in your organization with whom I can speak about these issues.

      Eugene Shmorhun

    5. tim mclean va says:

      The bill needs to be repealed. Hopefully the country will wake up and inform themselves.

    6. michael webster, ont says:

      Nice article. But it is a little too gloomy.

      There is way to access the health tax credit to get affordable health benefits.

      You need to combine a limited medical benefits program with a high deductible HMO. The limited medical benefits program by itself is not eligible for the tax credit, but when bundled with an HMO, the whole package may be eligible.

      I go through the example here: http://www.franchise-info.ca/supply_chain/2010/07

    7. Sue says:

      My husband is a sole proprietor. We can barely afford a policy to cover us of $500/month which has extremely high deductibles. We rec'd a letter from our ins company saying Obamacare is removing copays on some services, which will raise the cost of premiums. It also will remove pre-existing conditions, which will also raise the cost. This is effective NEXT year. I knew the hype about this bill was a lie and it is turning out to be exactly what everyone predicted. The Democrats scoffed at us and said they were lies. I'm so upset that the majority of Americans DO NOT pay attention to what's going on in gov't. They elect officials who are radically different than the majority of us. They are in it for the power and corruption and their own profit which is destroying this country.

    8. Pingback: Small Businesses Won’t Find a Friend in Obamacare «

    9. Brock Kruzic says:

      How can this be stopped? specifically the $600 1099,

      and your thoughts on getting the death tax repealed.



    10. Duane Berney says:

      Obamacare, cap and trade, Tarp, Taft, and huge deficits are meant to destroy this country. Obama said he was going to fundamentally transform this country and he is doing it. They pass 2,000 page bills in the middle of the night, give our hard earned tax dollars to the unions and the big corporations, they want to transfer the wealth, they are killing Capitolism, and we are all standing by in a gaze while it happens.I think health care will be the least of our problems. Once the economy completely collapses, its over!

      I have come to the conclusion that Obama knows he is a one term president and doesn't care. His goal was to do exactly what he is doing.


    11. TjOey123 says:

      It contractors and other contractors will be laid off due to obamacare and government cuts. It is a killer for employers. That's why the economy is so sluggish there is no incentive for the employers to hire people without suffering high costs of obamacare. Something needs to be done asap. I was a democrat but ..

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