Last Thursday, Treasury Secretary Tim Geithner sent a letter extolling the impact of Obamacare on small business. Geithner touted small business tax credits and the creation of health insurance exchanges as ways to enable a greater number of employers to offer health benefits.
But reality tells a different story. A day earlier, the House Committee on Ways and Means held a hearing to unveil the effects of the new health care law on businesses. Testifying before the committee were employers and economists, and their message was simple: Obamacare is bad for business.
Small businesses currently face an uphill battle to offer insurance to their employees, and the climb is becoming progressively steeper as insurance costs continue to rise. Obamacare will make these obstacles even more daunting.
The new law creates tax credits to assist small businesses in covering their employees, but only a small number of businesses will qualify for any assistance—and the credits expire after only six years. Joe Olivo, who owns a business of 45 employees, told the Ways and Means Committee that he was not eligible for the credit at all. Even a business hiring just 18 employees and paying, on average, $38,000 would not qualify, he said. The credits sound good on paper, but in reality, they do not provide a wide-reaching, permanent solution to the problem.
Geithner also points to the new exchanges, through which small businesses will be able to provide insurance for their employees beginning in 2014, as a way to expand access to lower cost coverage. But the health plans in the exchanges are likely to remain unaffordable for small employers as a result of Obamacare’s many provisions that will raise premiums.
Obamacare will not only make it more difficult for small businesses to offer insurance; it also includes many provisions that inhibit job creation and economic growth. As Ways and Means Chairman Dave Camp (R–WI) iterated, “New mandates and regulations will deter [businesses] from hiring new employees, threaten their ability to retain existing workers, and harm their ability to increase wages for existing employees. The new health care law compounds the uncertainty employers and entrepreneurs are facing amid the most challenging economic climate since the Great Depression.”
New mandates and penalties will increase costs for businesses, reducing their capacity to keep existing jobs or create new ones. The new law also creates burdensome new regulations for employers, of which the 1099 provision alone will result in significant new paperwork. Said Olivo, “This is a huge requirement that I do not have any sort of system in place to account for … calculating and collating receipts for purchases of thousands of items and services.”
Business owners operate small firms with the intention to grow, but under Obamacare’s harmful provisions for small business, this will become even harder. Full repeal is the only way to achieve health care reform in a way that helps businesses create jobs and provide health benefits for employees.