NCPA - National Center for Policy Analysis

Small Businesses Need Saved From Obamacare

May 5, 2015

A number of independent sources confirm Obamacare is harming small businesses. According to a paper published by the American Action Forum last September, the increased burden of regulations and rising health insurance premiums have reduced pay in firms with 20 to 99 employees by at least $22.6 billion annually, and has led to 350,000 job losses. Employees who kept their jobs have seen a decrease in pay of just under $1,000 annually.

Relief for the smallest businesses alone is not helpful because it makes it more expensive to grow. Although businesses with fewer than 50 employees are exempt from the requirement that they offer their workers so-called "affordable" government-approved policies (the employer mandate), the mandate only imposes a high marginal cost to hiring a 50th worker.

NCPA senior fellow John R. Graham says there is an opportunity to amend the Affordable Care Act to minimize its harm to small businesses. Obviously, Congress cannot repeal the entire ACA, because President Obama must sign any amendment this summer.

Amendments that would specifically help small businesses include:

  • Complete elimination of the employer mandate nationwide.
  • Restoring insurance regulation to the states by eliminating the Secretary of Health and Human Services' power to define "Essential Health Benefits" and other Obamacare regulations such as Minimum Loss Ratio for health insurers (which reduce the number of insurers competing).
  • The most important regulation to eliminate is the age band of 3:1. Section 1201 of Obamacare gives the secretary power to dictate this, which means an insurer cannot charge a 64-year-old more than three times as much as a 19-year-old. This artificially increases the premiums of young people, making it more expensive to hire them. A more accurate age band would be about 5:1.
  • Flatten Obamacare's tax credits as much as possible to reduce the marginal income tax "cliffs" that harm the incentive to work.
  • Eliminate the mandate for individuals to buy health insurance through an exchange in order to have their premium reduced by a tax credit. This will allow state governments to get out of the health insurance exchange business and eliminate the risk that small businesses will be taxed to finance their operations.

Source: John R. Graham, "Protecting Small Business from the Effects of Obamacare: Opportunities after King v. Burwell," National Center for Policy Analysis, May 4, 2015. 

 

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