Health Care Cost Worries Keep Small Businesses from Hiring

Jan 25, 2013

The most-important takeaway from the January Wells Fargo/Gallup Small Business Index is that health care costs are a huge worry for small businesses.

Fifty-four percent of respondents said health care costs were hurting their businesses a lot, and this is translating into less hiring. The survey found that 61% of small business owners who said they weren’t hiring “point to worries about the potential cost of healthcare as the reason they are not hiring” [emphasis mine].

Supporters of the Patient Protection and Affordable Care Act (PPACA) said it would reduce costs, but as the U.S. Chamber’s Small Business Outlook found, small businesses don’t buy that. Seventy-five percent think the health care law will increase their costs, and 71% said it would make it harder to hire more workers.

The PPACA is forcing firms to be creative in managing expected new costs. Some are looking at hiring part-time workers instead of full-time ones and others are restructuring their businesses to stay below the magic 50 full-time equivalent employees line to avoid being hit by the PPACA’s employer mandate set to take effect in 2014.

[Check out this chart to see if your business will have to offer health care coverage or pay a penalty.]

Instead of mandates and regulations, we should look at cost-containment solutions like incentivizing businesses to offer wellness programs, improving price transparency to make consumers better health care shoppers, and enacting liability reform to eliminate frivolous lawsuits.

As businesses prepare for full implementation of the PPACA, health care cost worries won’t go away, and as the Wells Fargo/Gallup poll indicates, working to ease the cost burden will encourage more hiring.

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