Among Many Health-Care Unknowns: The Law's Impact on Hiring

By Features FOXBusiness

Now that the sweeping health-care reform bill has become law, the questions over how it will affect businesses are no longer hypothetical.

Continue Reading Below

Only time will tell, of course. But one thing is certain: when it comes to how the new law will impact their bottom lines, individual business owners differ as much in their views as the politicians who battled for more than a year in support of and in opposition to the law’s passage.

Ask just about any business owner and they’ll say the same thing: they’d love to provide comprehensive health-care coverage for their employees, but most of them can’t afford it.

“I can’t afford health care today and I can’t afford it tomorrow with the way business is going,” said Craig Broswell, owner of Machinax Fabrication Inc., a Chino, Calif., machinery maker.

ReShonda Young, operations manager for Alpha Express, a family-owned business in Waterloo, Iowa, said her company can only afford “bare bones coverage” for its employees, but would like to do better.

The new law seeks to address that quandary through the creation by 2014 of state-run insurance exchanges where businesses can pool together to purchase coverage. Costs for businesses would ostensibly be lowered by economies of scale.

Continue Reading Below

In the meantime, the law provides tax incentives for businesses to add employees to the health-insurance rolls.

But will the law work as planned, spurring economic growth by lowering health-care costs and allowing companies to expand and hire new employees?

Or, as many business advocates have argued, will the opposite occur? Will employers balk at expansion plans or be forced to lay off employees now that they face additional health-care costs and possible penalties for not offering coverage?

Jim Edholm, president of Business Benefits Insurance, a health care consulting firm, questioned whether the law would have a direct impact on hiring, noting that the labor impact in 

Massachusetts, where a similar law was enacted in 2006, has been negligible.

"I think companies will get creative and what we'll see is larger companies breaking up into four companies, each with 49 employees," he said. After 2014, the new law will require employers with more than 50 employees to offer coverage or pay penalties.

“I think it’s a joke. It’s very bad for small business. I have six people and if I’m forced to pay for insurance for all of my employees I’m going to have to lay some of them off.”

- Craig Broswell, owner of Machinax Fabrication Inc., a Chino, Calif., machinery maker

However, Edholm wondered whether all the money that will be spent providing coverage for some 30 million uninsured Americans, both by the government and private employers, "is going to eat up money that could have been put to use putting people to work."

The U.S. Chamber of Commerce, which represents big and small businesses alike, has been outspoken in its criticism, especially since the final framework of a bill materialized late in 2009: “A mandate that employers provide health insurance or pay a fee will devastate many small businesses that operate at a loss or with low profit margins. These businesses will have to lay off workers and lower head counts,” read one recent statement released by the group.

Susan Eckerly, senior vice president of the National Federation of Independent Business, which bills itself as the “Voice of Small Business,” issued a statement following passage of the bill late Sunday. It read in part: “Those who chose to vote ‘yes’ for this bill have chosen to ignore the protests of their job-creating constituents. We couldn’t have been clearer how damaging this bill will be to America’s small businesses and the economic recovery of this country. America’s small businesses are outraged that so many members of Congress didn’t have the courage to stand up for them and vote against this job-killing healthcare bill.”

But while the lobbying arms of the business community are in synch over their opposition to this version of reform, individual employers aren't so sure. Much like their representatives in Congress, they are deeply divided over how the bill will affect their costs and hiring practices.

“I think it’s a joke. It’s very bad for small business. I have six people and if I’m forced to pay for insurance for all of my employees I’m going to have to lay some of them off,” said Broswell.
Broswell said the recession has been hard on his business. Whereas a decade ago he carried $80,000 to $100,000 in inventory backlog on his books, these days it’s down to $4,000.

“I can’t afford any more expenses,” he said. “We’ve got just enough business right now to keep the doors open. And if I have to pay penalties I would have to put people on the street, which doesn’t help the economy at all.”

Broswell said one of the reasons he can’t afford coverage for his employees is because insurance companies charge exorbitant amounts for workers with pre-existing conditions. The reform package enacted this week is supposed to address that problem.

Indeed, Alpha Express’ Young said she supports the new law precisely because it is designed to reduce the cost of covering workers with pre-existing conditions such as high blood pressure and acid reflux.

“I’m excited that it’s been enacted. We didn’t get everything we wanted but it’s a good start,” she said.

Young said she supported the so-called public option, which would have created a government-run entity to compete with private insurers in an effort to increase competition and drive down costs.

The state-run insurance exchanges called for in the new law is a “starting point,” said Young. “It’s definitely better than what we had before, which was nothing.”

Young said her company, which employs 19 full-time and 21 part-time workers, is already seeking quotes from insurers in an effort to obtain less costly but more comprehensive coverage for its employees.

If costs can be reduced to an optimal point, Young said it would eliminate the need for some of her workers to voluntarily cut their work hours to a point where they qualify for Medicaid, the federal insurance program for the poor.

“I know it’s not just those three people working for us. It’s the system and people are doing what they have to do to get around it and get their health care coverage,” she said.

Consider the savings to U.S. taxpayers if millions of Americans now covered by Medicaid can get cheaper coverage at work, she said.

Young said Alpha Express isn’t worried about the health-care-related costs of expansion.

“Having the problem of hiring more people is a good problem,” she said “I’m not worried about the penalties. If we need to hire more people we’ll hire more people. That means more money is coming in, we’re making more profits and we have more money to pay for health care.”

What do you think?

Click the button below to comment on this article.