Healthcare Reform-Hiring

Healthcare Reform: The Law's Impact on Hiring

Now that the sweeping health-care reform bill has become law, the questions over how it will affect businesses are no longer a hypothetical exercise, but many questions still aren't resolved, as many aspects are being left to govering agencies, some of which have not even been establed yet. Will the law work as planned, spurring economic growth by lowering health-care costs, thus allowing companies to expand and hire new employees? Or, as many business advocates have argued, will the opposite occur, miring businesses in additional debt and hidden taxes that spurn growth and cause further unemployment?

Only time will tell, of course. But one thing is certain: when it comes to how the new law will impact their hiring practices and bottom lines, individual business owners differ on views as much as the politicians. Ask just about any business owner and they'll say the same thing: they'd love to provide comprehensive health-care coverage for 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., machinery maker in Chino, CA. 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. In the meantime, the law provides tax incentives for businesses to add employees to the health-insurance rolls. Will employers balk at expansion plans based on meagor tax incentives 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, questions whether the law would have a direct positive 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 smaller 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," said Craig Broswell.

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 the 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," 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. 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. 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 is supposed to address that problem.

Alpha Express' Young said she supports the new law precisely because it is trying 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. "The state-run insurance exchanges called for in the new law is a starting point. 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 qualify for Medicaid, the federal insurance program for the poor. "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."

Unfortunately, many are not focusing on expansion, but are leary of the on-coming expanded costs of government intervention into previously private business affairs. How will healthcare reform affect your hiring practices?

Source: Dunstan Prial via

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