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

Posted By Kathryn Nix On July 30, 2010 @ 10:00 am In Obamacare | Comments Disabled

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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 [2] 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 [3], 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 [4].  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 [5].  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 [6].

In short, Obamacare will be make life far more difficult for small firms and their employees.  At a recent NFIB event [7], 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.” [8]

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.



Article printed from The Foundry: Conservative Policy News from The Heritage Foundation: http://blog.heritage.org

URL to article: http://blog.heritage.org/2010/07/30/side-effects-small-businesses-won%e2%80%99t-find-a-friend-in-obamacare/

URLs in this post:

[1] Image: http://www.foundry.org/wp-content/uploads/SideEffectsLogo3.jpg

[2] study by FamiliesUSA: http://www.familiesusa.org/assets/pdfs/health-reform/Helping-Small-Businesses.pdf

[3] Dr. Bob Graboyes: http://view.nfibcommunications.org/?j=fe5715707d6c037e7212&m=fef916797d6704&ls=fdfc11737661027d75177974&l=fe95167276660c7c7d&s=fe2610727d64077b7c1776&jb=ffcf14&ju=fe461d7573620d797c1d&WT.mc_id=&WT.dcsvid=428036936&WT.ti=SSH+Influencer+Email+-+5.13.10&WT.z_emailAddress=butlers@heritage.org&WT.z_jobID=10887376

[4] harm small firms: http://www.heritage.org/Research/Reports/2010/04/Obamacare-Impact-on-Businesses

[5] attractive, affordable insurance options: http://www.foundry.org/2010/06/11/side-effects-obamacare-adds-to-the-ranks-of-the-uninsured

[6] nonproductive paperwork: http://www.foundry.org/2010/07/13/side-effects-irs-and-businesses-unite-against-obamacare

[7] event: http://www.uschamber.com/webcasts/2010/100726_labor_heakthcare.htm

[8] “minimize the number of actual full-time employees…. It’s going to make it harder for us to hire.”: https://www.uschamber.com/assets/magazine/1006magazine.pdf

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