Compliance Costs

The Obamacare burden

"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 the Associated Press. The Affordable Care Act (ACA), a.k.a. Obamacare, will apply to all companies with 50 or more workers starting January 1, 2016, and requires owners to track staffers' hours, absences, and health insurance expenditures. The National Small Business Association (NSBA) says that compliance will cost, on average, $15,000 per business per year.

That has wide implications. One-third of the respondents to an NSBA survey were holding off on growth plans because of ACA costs. Smaller numbers planned more subcontracting or part-time hiring.

A National Federation of Independent Business representative told the Senate Finance Committee in March that, because of Obamacare, "62 percent of small business owners are paying higher premiums while only 8 percent say their costs have dropped."

The law's authors hoped to offset the higher costs for small businesses with tax credits. But getting those credits involves, yes, more compliance costs. Moreover, the tax credit paperwork must be repeated every year.

Costs affect larger firms, too. Last summer, the Federal Reserve Banks surveyed businesses in their regions. About 82 percent of service sector businesses told the Federal Reserve Bank of Dallas that Obamacare had raised costs for them in 2014; 91 percent expected increased costs in 2015. New York businesses made similar reports. Businesses around Philadelphia planned to raise prices, hire fewer workers, and use more part-timers to offset Obamacare's costs.