Health Care Law is Stopping Small Businesses from Hiring

May 2, 2013

An employee talks to a customer on the phone at Flowers By Julia in Princeton, IL. Photographer: Daniel Acker/Bloomberg.

After being around so many small business owners at America’s Small Business Summit earlier this week, I still have small business on my mind (that's not a bad thing). Yesterday, human resources firm ADP released its monthly job numbers. Its tepid April estimate of 119,000 new jobs with 50,000 coming from small businesses sparked Moody’s economist Mark Zandi to say on CNBC, “The data seems to be suggesting healthcare is having an impact” on small businesses' ability to hire. This reinforces the finding in the latest U.S. Chamber Small Business Outlook Survey that 71% of small businesses say the Patient Protection and Affordable Care Act (PPACA) makes it harder to hire people.

The health care law is so flawed that a “permission structure,” to borrow a phrase from the President, will never come about because of overwhelming frustration with the law, its chaotic implementation, its inability to make health care more affordable, and the billions in new taxes to pay for it.

Frustration has set in for many small businesses many of whom are wondering how the law will work and how it will affect them. Ken Conrad of Libby Hill Seafood Restaurants in North Carolina, told members of the House Subcommittee on Health, Employment, Labor and Pensions, “We have spent a large amount of time trying to understand the law and what we must do to comply, but still do not know the answers to many questions.”

Implementing the law has created a lot of heartburn in Washington. Senate Majority Leader Harry Reid (D-NV) was spurred to tell talk radio listeners that he agreed with Sen. Max Baucus’ assertion that implementing the law could be a “train wreck,” and President Obama told reporters at a press conference, "Even if we do everything perfectly, there will still be glitches and bumps.” While being honest, it wasn’t encouraging.

The Wall Street Journal covered a few possible glitches. Thirty-three states have refused to set up state-based exchanges so the Department of Health and Human Services (HHS) is setting them up for them. Also, because multiple government databases will have to talk to each other to determine whether a person is eligible for Medicaid or subsidized health insurance, how much of a subsidy they will get, and send the correct information exchanges in each state, expect tech hiccups when the exchanges open on October 1 of this year.

Yet, even if there are no bumps in the road, as Stanford professor Daniel Kessler writes in the Wall Street Journal, the end result will be more expensive health care coverage for millions of people. For example, many people who get insurance through the small-group insurance market (think small businesses) will expect to pay 13%-23% more in higher premiums. In tight-knit shops and offices, you can bet small business owners are hearing these worries from their employees.

Then, as Americans for Tax Reform reminds us, the health care law is funded with billions in new taxes—on investment income, payroll, health insurance, medical devices, etc. [Here’s a prettier chart put out by the U.S. Chamber.] Raising taxes doesn’t encourage small businesses to invest and hire.

While small businesses show displeasure for the law by not hiring workers, we see the general public's dismay through the law’s falling poll numbers. A Kaiser Family Foundation poll found that only 35% support the law, while 40% oppose it. 

The health care law is supposed to make health care more affordable. What’s it’s actually doing is creating confusion and frustration that is holding back small businesses from being the strong job-creating engines they can be.

The U.S. Chamber has some tools to help small businesses better understand the health care law, determine if a business has to offer health care coverage, and calculate how much the employer mandate could cost.

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