Obamacare Is Really Expensive for Small Businesses. Surprise!

Lousy news for growing the economy, creating jobs, and overall increasing prosperity



"Complying with the health care law is costing small businesses thousands of dollars that they didn't have to spend before the new regulations went into effect," reports AP business writer Joyce M. Rosenberg. This should be a surprise to exactly nobody. In general, government mandates have poor track record of making people's lives less expensive and complicated. Specifically, businesses around the country have reported over the past year that Obamacare raised their healthcare costs and they anticipated more hikes to come. Hiring—especially of full-time employees—has taken a hit as a result.

Writes Rosenberg:

The Affordable Care Act, which as of next Jan. 1 applies to all companies with 50 or more workers, requires owners to track staffers' hours, absences and how much they spend on health insurance. Many small businesses don't have the human resources departments or computer systems that large companies have, making it harder to handle the paperwork. On average, complying with the law costs small businesses more than $15,000 a year, according to a survey released a year ago by the National Small Business Association.

Last summer, Federal Reserve Banks around the country surveyed businesses in their regions. In the service sector, about 82 percent of businesses told the Federal Reserve Bank of Dallas that the Affordable Care Act raised costs for them in 2014; 91 percent expected increased costs in 2015.

Federal Reserve Bank of Dallas

The manufacturing sector told a similar story of rising costs with more anticipated to the Dallas Fed.

The New York Federal Reserve Bank received similar reports from businesses of increased health costs from the Affordable Care Act, again with predictions of more of the same in 2015.

Businesses told the Federal Reserve Bank of Philadelphia they planned to raise prices, hire fewer workers, and use more part-timers because of the increased costs associated with the health law—unhappy news reported by the other surveys, too.

Looking only at small businesses, one-third of respondents to a National Small Business Association survey said they were holding off on growth plans because of ACA costs. Smaller numbers planned more subcontracting and part-time hiring.

National Small Business Association

The National Federation of Independent Business's Research Director Holly Wade told the Senate Finance Committee last week that, in terms of Obamacare, "The problems that many predicted have arrived but most of the promises for small business owners remain unfulfilled. We found that 62 percent of small business owners are paying higher premiums while only eight percent say their costs have dropped."

Higher costs for small business because of the mandates and compliance burdens mentioned by Rosenberg were somewhat anticipated by the law's authors. They were intended to be offset by tax credits. But getting those tax credits involves, yes, more compliance costs.

"Qualifying for the credits is cumbersome and complicated," noted Wade. "The tax credit is temporary but the mandate is forever, so the financial advantage is very small over the long run. It's certainly not enough to offset the higher costs and the administrative headaches that the law imposes on small business owners."

Which isn't good news for growing the economy, creating jobs, and overall increasing prosperity.