The WasteWatcher: The Staff Blog of Citizens Against Government Waste

Businesses and Obamacare: Not a Good Mix

The WasteWatcher is the staff blog of Citizens Against Government Waste (CAGW) and the Council for Citizens Against Government Waste (CCAGW). For questions, contact blog@cagw.org.


Public Opinion Strategies (POS) is a well-respected market research company specializing in corporate and public policy research.  The company recently undertook a survey of 208 decision makers in franchise-owned businesses and 206 decision makers in non-franchise businesses that have between 40-500 employees and asked them about the impact of the Affordable Care Act, better known as Obamacare, on their companies.   Why is this group of businesses important in the United States?  They represent 42 million jobs, which is over 25 percent of all employed Americans.  The survey was undertaken on behalf of the International Franchise Association (IFA) and the U.S. Chamber of Commerce.

Here’s the bottom line from the survey: These decision makers report that “ACA has already resulted in higher costs and fewer full-time positions.  When fully implemented in 2015, the survey results suggest the ACA employer mandate will result in fewer employers providing health care.”

Here are some of the key findings from the survey:

  • Sixty-four percent (64%) of business decision‐makers in franchisee-owned businesses and 53% in non‐franchisee owned businesses believe the ACA will have a negative impact on their businesses.
  •  Many businesses are already seeing their health care costs increasing because of the law.  To cope, 31% of franchise and 12% of non‐franchise businesses have already reduced worker hours, a full year before the employer mandate goes into effect.
  • Additionally, 27% of franchise and 12% of non‐franchise businesses have already replaced full-time workers with part-time employees.  Other cost control methods cited by survey participants included hiring only temporary help and cutting benefits and bonuses.
  • Among businesses with 40 to 70 employees, 59% of franchise and 52% of non-franchise businesses plan to make personnel changes to stay below the 50 full time equivalent employee threshold.  This accounts for 23% of all franchise and 10% of all non-franchise decision‐makers surveyed.
  • Large chunks of decision-makers say the employer mandate will mean they will drop health coverage, opting instead to pay a penalty for each employee.  In effect, among this segment of businesses, the employer mandate will more than double the percentage of franchise-owned businesses and more than triple the percentage of non-franchise businesses that will not offer health coverage.

The businessmen surveyed believe the law will disincentive them to grow their businesses and cause them to do the opposite: cut staff and hours, utilize fewer full-time workers to a greater degree, and cause undue strain to their operations.

ACA requires that employers with 50 or more full-time equivalent employees that do not provide health insurance to be assessed a fine of $2000 (or more) per each full-time employee, excluding the first 30 employees from the assessment.  Within the survey is a subgroup of businesses: employers with 40-70 people employees.  They are planning to take specific actions in 2015 to stay below the 50 full-time equivalent employee threshold.  They will:

  • Cut full-time staff and cut hours of part-time employees
  • Hire only temporary help or part-time employees and strictly monitor hours
  • Stop making efforts to grow and expand the business
  • Cut benefits and bonuses

What could this mean for America?

Here is a chart of the Euro-area unemployment rate since 1995. You can find the statistics here.  Amazingly, since 1995, the average unemployment rate has not dropped below 7 percent.  In fact, an average of 7 percent unemployment looks pretty good considering the current average is at 12.2%

Here is what the United States unemployment rate looked like during the same time period.  You can find the statistics here.

 

For most of the same time period, the U.S. remained below 6 percent unemployment until the Great Recession that started in late 2008.  Since 2009, we have added billions to our debt, now over $17 trillion and climbing.  What is adding to our debt is over spending and our growing entitlement programs such as Medicare and Social Security.

European unemployment has been consistently higher than unemployment in the U.S.  The Europeans have had an entitlement state, including national health insurance, for some time and the costs are being paid for with corresponding high unemployment.  After all, someone has to pay for all the “free” stuff the Europeans get in their social welfare states.  Europeans pay very high taxes and their stifling regulations prevent economic growth as well.

Unfortunately, the findings in the POS survey above regarding the effect of Obamacare on U.S. business would seem to indicate our nation is on a glide path to be on par with Europe when it comes to a lack of job creation and sluggish economies.

The results of the survey should send chills up and down the spines of all Americans.  Obamacare is not good for business and not good for employees.  It certainly is not good for America.  If Obamacare stays, do not expect our employment and economic situation to get better, expect it to get worse.

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