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Gauging the Impact of Obamacare on SMEs

The signature legislative achievement of President Obama’s tenure, the Patient Protection and Affordable Care Act (aka Obamacare), was born without a single Republican vote in Congress and nurtured to fruition by the Supreme Court of the United States. The impact on small and medium size business will force many CEOs to make difficult choices.

Supporters of Obamacare believe everyone should have access to healthcare. While universal access to healthcare is a noble goal, how the law will work and who will pay for it remains a divisive issue. In fact, the most recent polling data from Rasmussen Reports shows that 54% of Americans have an “unfavorable” view of the new healthcare law.

Politics aside, the full rollout of Obamacare is on the way. Consequently, attention is shifting from partisan battles inside the beltway to how the law will impact health insurance costs for millions of Americans.

An area of great concern is how businesses will pay for and provide health insurance for their employees. Although Small businesses (those with 50 or fewer employees) may be exempt from the Affordable Care Act, their potential growth will be asymmetrically handicapped. In a recent Gallup poll, 41% of small-business owners say they have held off hiring new employees and 38% have pulled back on plans to grow their business. Small business owners, whose companies have been traditional incubators of innovation and employment, have determined that it may be wiser to sacrifice future growth in order to avoid the potential penalties associated with managing the Affordable Care Act.

Richard Navarro, owner and president of Navarro Construction Services faces a double burden. Navarro, whose firm does high-end historical renovations, employs ten people 8 of which are Hispanic legal immigrants. Although he is used to navigating rules and regulations on behalf of his work force, Navarro says “Now, I have to try to explain a 2,700 page bill.” Like many people, Navarro believes in the goals of Obamacare, “I think overall the bill is a good thing, it’s a positive thing. A healthy labor force at the end of the day is vital to the business and helps with the bottom line.” Altruism notwithstanding, Navarro expects to pay more for health insurance, but if his rates double or triple, he says he will have to change how he does business.

Keith Murphy may be a Republican State Representative from New Hampshire, but as a small business owner he shares many of the challenges facing Navarro. Murphy is a restaurant owner, employing as few as 35 people in the winter and peaking at about 100 in July before his college-age servers and bartenders return to school. In questioning his accountant it has become obvious to Murphy that Obamacare will force him to make some very hard decisions. In reviewing his options, Murphy says he can: 1) Pay a fine of $2,000 per employee past the first 30 for not offering insurance. This would result in an annual fine of approximately $140,000, representing about half of his profits. 2) Provide his employees with a health insurance plan that exceeds a specified standard. Murphy calculates this option would reduce his profit by about $113,000 each year. Once again, a big hit to his bottom line. 3) Keep his head count under 50 employees. Similar to other small business owners, choosing this option keeps costs down, but squelches any plans of expanding. Murphy notes that, “politics aside, this law would impact a Democratic business owner just the same.”

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