NCPA: ObamaCare Places Big Burden on Small Business
Jun 12, 2014 | 1807 views | 0 0 comments | 3 3 recommendations | email to a friend | print

NCPA: ObamaCare Places Big Burden on Small Business

Cost of Employee Coverage Equivalent to $3 "Minimum Health Wage"

Dallas, TX (June 12, 2014) – The costs imposed by the Affordable Care Act on small businesses will hurt hiring, employee compensation and business growth, according to a new report by National Center for Policy Analysis (NCPA) Senior Fellow Devon Herrick.

“The Affordable Care Act contains sweeping changes to the employer-sponsored health insurance market,” says Herrick. “Though it was promoted as a way to lessen the problems small businesses experience in providing health coverage, many business owners report that the law is increasing their burdens.”

Nearly two-thirds of Americans with health coverage have employer-sponsored health insurance, which means that much of the burden of complying with the ACA falls directly on businesses:

  • The Congressional Budget Office (CBO) estimates that the required coverage for individuals will cost $5,800 a year or more by 2016 -- equivalent to an additional $3 per hour "minimum health wage." Family coverage could cost more than twice that amount.
  • Because businesses with less than 50 full-time employees are exempt from the requirement to provide health insurance, those with 50 or more workers are incentivized to cut their workforces, move employees to part time or not offer coverage at all. The ACA's $2,000 fine per worker for not providing health insurance is less than the cost of providing it.
  • While firms were told that their health plans would be "grandfathered," insulating them from regulation, that status is easily lost when plans change. Two-thirds to 80 percent of small business employer plans will likely lose their grandfathered status. Large, self-insured companies and unions, however, are free to change their third-party administrators and still retain grandfathered status.
  • According to a survey by Morgan Stanley, premium rates have risen substantially. Firms renewing small group insurance in 2014 saw an 11 percent premium hike. For firms with coverage through BlueCross, the premium increase was almost 16 percent.
  • Premium increases were much higher in some states than others. Premiums for small group policies renewing in 2014 increased 66 percent in Pennsylvania, 37 percent in California and 34 percent in Indiana. Washington saw premiums rise by an astounding 588 percent.  

“The Obama Administration itself admits that two-thirds of small employers could see a jump in premiums due to provisions of the health care law,” says Herrick. "More employers will see insurance cancellations and premium hikes this fall as they are forced to replace lower cost health benefits with more comprehensive, ACA-compliant coverage."

To reduce costs, employers are passing health care costs on to workers, raising copayments, boosting the costs of dependent coverage, delaying hiring and reducing work hours. 

Herrick's report includes a state-specific analysis of employee health insurance for California, Florida, Georgia, Maine, New York, Ohio, Texas and Wisconsin.

Link: The Effects of the Affordable Care Act on Small Business: http://www.ncpa.org/pub/st356

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The National Center for Policy Analysis (NCPA) is a nonprofit, nonpartisan public policy research organization, established in 1983. We bring together the best and brightest minds to tackle the country's most difficult public policy problems — in health care, taxes, retirement, education, energy and the environment. Visit our website today for more information.
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