NCPA - National Center for Policy Analysis

What Has Obamacare Cost Small Business Workers? $22.6 Billion

September 11, 2014

A new report from researchers at the American Action Forum has detailed the impact of the Affordable Care Act on small businesses (those companies that employ between 20 and 99 workers).

Obamacare requires that companies with at least 50 employees provide health insurance to their workers; companies that do not are forced to pay a government fine. Businesses cannot have their pick of insurance plans but must comply with various regulations that limit their ability to choose plans at low cost.

The researchers analyzed the market prior to Affordable Care Act, concluding that there was no statistically significant relationship between health care premiums and employment prior to 2010. That changed with the introduction of Obamacare, when employers began cutting jobs and wages.

According to the report, a 1 percent increase in health insurance premiums was associated with a 0.031 percent decrease in wages for businesses with 20 to 49 employees. For businesses with 50 to 99 employees, a 1 percent increase in premiums correlated with a 0.109 percent drop in wages.

While those numbers seem small, they become much larger when one looks at the premium increases after the Affordable Care Act:

  • After the ACA, premiums increased by much more than 1 percent -- in the average state, they grew by 19.8 percent between 2009 and 2013, rising from $4,653 in 2009 to $5,576 in 2013.
  • That nearly 20 percent increase, therefore, is associated with a 2.2 percent drop in weekly pay.
  • That amount adds up: On average, employees in firms with 50 to 99 employees lose $935 annually due to Obamacare. For employees in firms with 20 to 49 employees, that figure is $827.50.

With 14.8 million American workers employed in businesses with 50 to 99 employees, and with 19 million Americans working at companies with 20 to 49 employees, the Affordable Care Act has cost workers a respective $10.8 billion and $11.18 billion annually -- a combined cost of $22.6 billion for workers in businesses with 20 to 99 workers.

The report notes that five states -- California, Florida, New York, Ohio and Texas -- have lost more than 20,000 jobs each due to rising health care premiums.

Source: Ben Gitis, Conor Ryan and Sam Batkins, "Obamacare's Impact on Small Business Wages and Employment," American Action Forum, September 9, 2014.


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