PROTECTING SMALL BUSINESS, PROMOTING ENTREPRENEURSHIP

The Coming Ills of ObamaCare

By at 6 June, 2013, 9:22 am

by Raymond J. Keating-

After being signed into law more than three years ago, American voters still do not like ObamaCare.

According to a survey of likely voters by Rasmussen Reports released on June 3, 54 percent view the ObamaCare law unfavorably, with 41 percent viewing it favorably. For good measure, 60 percent believe that free market competition would do more to reduce health care costs, as opposed to 22 percent who believe that government regulation is a better means for reducing costs.

Well, ObamaCare, of course, is all about more government regulation and control, and less market competition.

As we look ahead to the brunt of ObamaCare mandates, regulations and spending taking hold in 2014, what’s actually in store, especially for small businesses? Are all of the negative views and many concerns warranted?

I had the chance recently to ask such questions to and gain insights from Victoria J. Braden, who is president and CEO of Braden Benefit Strategies, Inc. , a firm offering businesses insights on health care insurance and financing.

The first question: Are small business concerns regarding the big steps in 2014 on imposing ObamaCare warranted? Braden straightforward answer was: “Absolutely.” She went on to highlight myriad issues and problems.

For example, small group health insurance policies will have to cover “minimum essential benefits.” That means “ObamaCare is dictating what small business plans will cover regardless of the increased cost.” She points out, “We used to call this unfunded mandates.”

There’s also the effect of community rating. Braden noted that small employers “will be subject to community rating, a pre-determined price based on the plan design and employee age.  Not only is this expensive, it eliminates the need for small business employees to control their healthcare purchases, focus on wellness or curtail their use of the system, since whatever they do will not directly affect their company’s premium.  The community rating is a dictated rate and therefore a fixed cost versus a negotiated rate based on the benefits purchased.”

And what exactly is a “small business” under the law? Braden again points to uncertainties and questions: “The employee composition of a small business in 2013 will be the measurement as to what parts of ObamaCare the business will need to comply in 2014.” And many small business owners simply “do not know this.” They also “are often not aware of ‘common ownership’ laws, which affect determination of a small business versus a large business.” For good measure, the Department of Labor “is looking for and auditing companies using 1099 employees.” Also, “trying to discern the size of a business in 2013 to determine the requirements for implementing ObamaCare in 2014, there is a look-back period,” whose operations remain a mystery to Braden and others, yet as she noted, “is huge, especially in companies where the business tends to be seasonal, such as fast food, yet the employees would not be considered seasonal.”

And what about surprises for business owners in 2014, and help from their agents? Braden reported, “In the agent educational meetings, we are seeing maybe 20 percent of the agents participate, which concerns us that as many as 80 percent of agents, and therefore small businesses, are not prepared for healthcare reform.” On the surprise factor, “It is going to depend on their knowledge level and the assistance they receive from their agent.  The agent is critical, and yet so many of them appear to have checked out and reduced their services to order takers.”

Finally, Braden pointed to ways that small businesses might be able to deal with this onslaught of mandates and costs. One option, which previously was not cost effective for smaller businesses, is a self-funded policy. She explained, “Previously, these policies were used on a very limited basis in groups with less than 300 employees, in my market, as the carriers said the administrative costs were too high for the premiums to be competitive with the fully insured plans.” Under ObamaCare, though, companies using self-funded plans would not be subject to various mandates and regulations, such as community rating, and there would be tax savings, along with policies not being subject to state mandates but rather regulated under ERISA. Bottom line: “Currently self-funded products are running 6 percent to 8 percent above the fully insured rates in my market.  However, once community rating hits, we fully expect self-funded products to be significantly less than the community rates.”

Small businesses and voters do not look favorably on ObamaCare. But at this point, this negativity seems largely to be based on the unknown. Once the hard realities of ObamaCare hit in 2014, those polling negatives promise to rise still higher. Far more troublesome, of course, will be the harsh, negative effects in terms of increased costs, and diminished entrepreneurship, business development, economic growth and job creation.

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Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.

Keating has written two new books titled Root of All Evil? A Pastor Stephen Grant Novel, and An Advent for Religious Liberty: A Pastor Stephen Grant Novel.

 

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