Hadley Heath

While many issues will help drive voters to the polls this November, two hot topics stand out as key motivators in this midterm election: the economy and health care reform. In fact, a recent poll of independent voters from Independent Women’s Voice revealed that 68 percent said the economy was on the wrong track and 73 percent wanted candidates to support the repeal of the new health care law.

Ironically, these two issues are closely tied: Without repeal, businesses will face new burdens that will discourage job creation and economic growth, prolonging our current economic malaise.

Business and health insurance have been intertwined for decades. In the 1940’s, the federal government prevented employers from raising wages, so businesses had to find other ways – such as providing benefits like health insurance – to attract quality employees. Today, about two-thirds of Americans under the age of 65 have employer-provided insurance.

For years, costs to employers have been rapidly increasing, which is one reason politicians have made health insurance reform a priority. Unfortunately, the legislation passed in March, which is today commonly referred to as “Obamacare,” won't give businesses relief. Instead, businesses are finding that the new law will add to their burdens by increasing health insurance costs, limiting their flexibility, and creating complicated new paperwork burdens.

For starters, not all employers can afford to provide employees with health care coverage. As a result of this new law, employers with 51 or more full time employees will be required by law to provide adequate coverage or pay an annual penalty of $2,000 per worker in excess of thirty workers. So, a business of 51 workers that can’t provide coverage will face a penalty of $42,000.

While reform was supposed to encourage employers to provide better benefits, it instead creates incentives to dump health benefits altogether. Those firms with fewer than 50 employees face comparatively minor penalties for failure to provide insurance. In fact, the best cost-reducing strategy for some will be downsizing their staff and outsourcing work—not exactly what Americans are hoping for given our current high levels of unemployment and sluggish economic growth.

Those employers who are providing coverage are likely to find their health care costs will rise as new government mandates kick in. The law bans lifetime and annual maximums, cost-sharing for preventative services, and requires insurers to provide coverage for pre-existing conditions and allow single, adult children to remain on their parents’ insurance plan up to age 26.

These are just the first of the new requirements, since the government will be free to determine what insurance is considered “adequate.” Requiring more generous plans will send prices up. In fact, Mercer, a leading global health benefits consulting firm, determined in its 2009 National Survey of Employer-Sponsored Health Plans that 62 percent of small businesses have at least one “red flag” in their current plans that violates the new mandates. This means these businesses will have to provide different coverage, in all likelihood paying significantly more, or face government sanction.

Businesses and individuals will also face a slew of new taxes to pay for the new law. Tanning salons are targeted for a 10 percent tax. There's also a new 0.9 percent Medicare surtax on high earners, which won't just affect “the rich,” but all of the small business owners who file under the individual income tax code.

Some supporters of Obamacare have said that new costs for business would be offset by tax credits for providing health insurance. Yet the tax credits last for a maximum of only 6 years and apply solely to businesses with fewer than 25 workers and with average salaries of less than $50,000. In addition to not providing businesses with much relief, this tax credit structure creates significant disincentives to hiring and raising wages because the credit decreases as the number of workers or their average earnings increase.

Furthermore, the law creates major new tax paperwork requirements. According to an estimate from the National Small Business Association , the new mandate that businesses file a 1099 form for every transaction in excess of $600 will mean that instead of filing an average of 10 forms a year, businesses will have to file 86. For some small businesses, this will mean having to hire an accountant, rather than handling tax forms in-house.

Proponents of the new law promised that it would lower health care costs while insuring more Americans. Unfortunately, businesses—and all the workers that depend on the private sector for jobs—are learning that this law is filled with provisions that raise the cost of doing business in the United States. It’s no wonder so many voters want it repealed.


Hadley Heath

Hadley Heath is a Policy Analyst at the Independent Women’s Forum.