ObamaCare’s impact on businesses

The new US health care law will impose new compliance regulations, employer mandate taxes, taxes on business "flow-through" and investment income, and numerous indirect costs on small- and medium-size companies. Altogether, these constraints will dramatically affect companies' per-employee costs, firm-level allocation of labour, desire to take on health coverage, and motivation to grow both in terms of income and employment, says the Heritage Foundation.

ObamaCare will dramatically impact the behaviour of small businesses in the United States, says Heritage:

ObamaCare does nothing to "bend down the cost curve" that small businesses face relating to providing health insurance coverage.

It will not address the many uncertainties small businesses face in deciding whether to offer health insurance coverage to its workers.

Small businesses do not have the capacity to easily take on additional administrative complexities, and therefore will have to hire additional workers.

It will increase the Medicare payroll tax and establish a new Medicare non payroll ("investment") tax; this tax will apply perversely to "flow-through income"- thus reaching a significant share of small businesses.

ObamaCare will dramatically impact the behaviour of medium-size firms in the United States – specifically those companies with 50 to 199 workers, says Heritage:

Beginning in 2014, ObamaCare will begin imposing taxes (to help offset the cost of individual employees receiving premium subsidies through the to-be-established state health insurance exchanges) on companies with 50 "full-time equivalents" that do not offer an "acceptable" level of health insurance coverage.

These mandates will force companies – including companies below the 50-employee threshold – to react to eventual overall cost increases.

ObamaCare fails to appropriately address the concerns of small- and medium-size businesses relating to health care reform and it will force many companies to react to new cost burdens. The intended consequences of this bill are harmful enough, but the many unintended consequences are even worse, says the Heritage Foundation.

Source: John L. Ligon, ObamaCare: Impact on Businesses, Heritage Foundation, April 27, 2010.

For text: http://www.heritage.org/Research/Reports/2010/04/ObamaCare-Impact-on-Businesses

For more on Health Issues: http://www.ncpa.org/sub/dpd/index.php?Article_Category=16

First published by the National Center for Policy Analysis, Dallas and Washington, USA

FMF Policy Bulletin/ 04 May 2010