Small Business on Obamacare: No Reason to Hire or Invest
owners and advocates responded to today’s Supreme Court decision on the Patient Protection and Affordable Care Act with anger, confusion and a lot of questions about where they go from here.
“At this point, I have more questions than I have answers,” said Larry Mocha, president, Air Power Systems in Tulsa, Okla. “We already provide health insurance for our employees and have for many years. How will this impact our premiums? How will this impact [America’s] health-care system? And how will this impact my small business?”
Small business owners, who have been waiting for the court’s decision on Obamacarebefore making decisions on hiring and investment now say the decision raises more questions than it answers.
The Supreme Court ruled that the government can require that most Americans have health insurance, and require that individuals pay a penalty for not having insurance, which, according to Chief Justice John Roberts, “may reasonably be characterized as a tax.”
“This decision sustains the uncertainty they currently have,” says Steve Caldeira, president and CEO of the International Franchise Association. “The impending costs of health care do not give business owners confidence to open that extra store or to hire more people and create the economic output our country needs.”
Jim Amos, CEO and chairman of Tasti D-Lite, a frozen yogurt franchise that operates in 14 states as well as globally, is certain of one thing: The ruling will hinder growth in the franchise space. “It’s going to force franchisees to shift workers to part-time to avoid the 50-employee threshold,” he said. “It will keep new owners and new openings on the sideline.”
“This decision will be negative for future employment,” said Marc Schupan, CEO, Schupan & Sons, who provides health insurance of his employees. "We will look at hiring more closely and could increase temps as opposed to full-time personnel.”
That concern, that businesses will not increase the number of employees if it means they will have to take on more health-care costs, is top of mind for many business owners.
"The government is rewarding and encouraging businesses to remain 50 people or less to avoid the total payment of high health insurance premiums," said David Greenspon, CEO of Competitive Edge in Des Moines, Iowa. Greenspon, which employs 150 people, expects this decision could increase his health-care costs by $500,000. He predicts that it will be less expensive for some business owners to pay the penalties for non-compliance than pay additional fees to insure all employees.
Dan Danner, president and CEO of the National Federation of Independent Business, which challenged Congress’ authority to mandate that all Americans have health insurance, called today's ruling "a bait and switch. Congress can enact a tax and not call it a tax.”
That characterization was a surprise to both the NFIB, which spent nearly two years and “significant sums of money” according to Danner waging a fight against Obama’s health-care reform policies.
"We talked about why it wasn’t a tax, why the president didn’t call it a tax,” said Karen Harned, executive director of NFIB’s Small Business Legal Center. "But today, we’ve got the Supreme Court saying it is a tax. For a body that is supposed to be acting like an umpire, calling balls and strikes, excuse me for saying I don’t think that’s what happened today.”
Employers are going to now essentially be taxed for every employee, said Barry Sloane, CEO of Newtek, a small-business lender and business service provider. “I think what just occurred was that the older population just got a wealth transfer from younger, healthier people that otherwise would not have paid for health care. It’s unlikely that this will make it less expensive for everyone.”
"We're going to look at legislative opportunities to repeal the law, and address the sorts of things that hit small businesses the most."
Taking a wait-and-see approach is David Grenier, owner of Greiner Buick GMC in Victorville, Calif. “Half of the politicians say it will lower premiums in the long run by forcing the healthier Americans into the pool, while the other half say that it will raise premiums by forcing insurance companies to insure the very sick,” he wrote in an email to CNBC.com. "What I am certain of is that we as a business cannot sustain any more increases in health-care costs and will pass all increases on."
And, despite the questions that remain, many business owners agree on one thing. This is not the end of the health-care reform debate.
“There are a lot of things we’re worried about that might take away choices and add to costs once the law is fully implemented,” said the NFIB’s Danner. “Were’ going to look at legislative opportunities to repeal the law, and address the sorts of things that hit small businesses the most. We’ve always said that small businesses needed health-care reform, but there are things in this law that we think are terribly punitive to small businesses, and we will do everything we can to fight. Health-care reform shouldn’t come on the backs of small business."