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Small businesses have been greatly impacted by the Affordable Care Act, and most of those attending a U.S. House of Representatives committee hearing on Tuesday said the effects were negative.
"In my opinion, and in the opinion of many, President Obama’s signature legislation has proven to be a disaster, especially for America’s small businesses,” Steve Chabot, chairman of the House Small Business Committee, said during his opening remarks.
Ranking Member Nydia Velazquez (D-NY) disputed Chabot's claim.
“Seven years ago, the president signed into law the Affordable Care Act for the over 20 million people that have secured coverage," she said. "It has not been a disaster."
After panel remarks at the outset of the "Reimagining the Health Care Marketplace for America’s Small Businesses" hearing, the panel heard expert testimony.
Thomas Secor, president of Durable Corp., a small Ohio-based manufacturer and distributor, testified on behalf of the National Small Business Association (NSBA). He said the substantial costs associated with the ACA are one of the most debilitating problems facing small businesses.
“Fewer and fewer small businesses, especially those with fewer than 50 employees, offer health insurance as an employee benefit,” Secor said. “This is not because they do not want to; it is because they simply cannot afford to offer a plan.”
Secor, who stopped offering health insurance to his employees in 2014 due to increased costs and the complicated task of shifting to an ACA-approved plan, said he now offers health care benefits thanks to a last-minute decision by the Obama Administration that let him continue to offer a non-ACA approved plan, but at a higher cost.
“Even with a non-ACA approved plan, our average total cost per employee has risen to 51.7 percent between 2013 and 2017,” he said.
According to the NSBA's 2015 Health Care Survey, keeping up with changes to the ACA’s mandates consumed an average of 13 hours per month – nearly four weeks’ worth of work each year.
The survey also revealed that 90 percent of respondents reported increases in their health plan premiums at their most recent renewal, with one in five small firms reporting premium increases of more than 20 percent, Secor said.
“It’s no wonder one in four firms are purposely not growing as a result of the ACA,” Secor said. “Complexity and uncertainty give rise to a system that inappropriately overshadows and often stifles the ability of business owners and individuals to succeed innovate and pursue entrepreneurship.”
Secor added that the Institute of Medicine estimates that the $105 billion dollars in annual waste in health care spending can be attributed to the lack of competition and excessive price variations.
Keith Hall, president and CEO of the National Association for the Self-Employed, said his organization represents more than 27 million self-employed business owners who with very few employees; about half of the businesses are home-based. Their average gross family income is about $90,000, which is right at the threshold for subsidies.
“As an example, a family in Cheyenne, Wyoming, will pay about $14,000 a year for a Silver plan," Hall said. "That’s about 16 percent of their income. We’ve (got to) concentrate on lowering that cost."
Although various incentives could be explored to reduce health care costs, Hall said it’s important to realize that no matter how affordable health care becomes, self-employed business owners will still pay 15.3 percent more for their health insurance due to the tax code.
“That just doesn’t make sense to me,” Hall said. “The reason is their health insurance is not deductible as a business expense. This is easy to fix. Congress can just move the deduction off of page one of their tax returns over to the Schedule C. That saves 15 percent right here, right now.”
Hall said that while other measures that could make health care more affordable for self-employed business owners might be quite complex, he simply wants a fair playing field for those he represents.
“My only formal request is that those self-employed business owners have exactly the same rules as big businesses do,” Hall said. “If big businesses get a deduction for their health insurance costs, small businesses should as well.”
Kevin Kuhlman, director of Legislative Affairs at the National Federation of Independent Business (NFIB), also testified during the hearing, saying the NFIB conducted four scientific research surveys following implementation of the ACA.
The surveys showed that the costs associated with the ACA for small businesses outweighed the benefits and led to increased compliance burdens and decreased flexibility, Kuhlman said.
“These consequences led to a significant 25 percent reduction in the offer rate for small businesses between 2010 and 2015,” he said. “For the first time, fewer than 30 percent of businesses offered health insurance to their employees in 2015. Small business was clearly an afterthought during ACA consideration and implementation.”
New insurance requirements and taxes imposed on both the individual and employer markets drove up plan costs, which were passed on to small business owners and employees.
Fortunately, in 2015, Congress approved temporary relief from two of the taxes created in the law in late 2015, Kuhlman said. But the health insurance tax, which costs small businesses and employees an additional $400 per family, resumes in 2018, and the "Cadillac" tax on high-cost group plans Congress halted for two years is set to be implemented in 2020.
“As Congress considers a partial repeal of the ACA through reconciliation and a repair of the health insurance markets, please prioritize affordability, flexibility and predictability for small businesses,” Kuhlman said. “Health reform that works for small business will work for the rest of the country.”
