Obamacare was marketed to the American people as health care reform that would expand coverage to reduce the number of uninsured.  One of the ways this would be accomplished, proponents said, was by making it easier for small business to offer insurance.  Small businesses are the backbone of the American economy and have the greatest potential to create the jobs that Americans are currently desperate for.

Unfortunately, Obamacare will hinder the growth of these businesses. In a recent paper, Heritage’s John Ligon explains how the new health care laws will be largely ineffective at expanding coverage offered by small business, while simultaneously severely limiting job creation and growth.

Ligon outlines the four main ways small businesses and the employees stand to lose under Obamacare:

  • Higher Premium Costs. Several provisions of the health care legislation will drive the cost of premiums upward, including heavy new federal regulations, individual and employer mandates to buy insurance, and other industry fees and taxes.  Ligon writes that this effect will be particularly pronounced “in the “fully insured” market, where 88 percent of workers and dependents at small businesses purchase health insurance.”
  • Ineffective Small Business Credit. Obamacare includes tax credits for small business, “which the Congressional Budget Office estimates will impact at most 12 percent of businesses with 25 or fewer workers and expire after two years…”  These credits are thus expected to be largely ineffective at encouraging small employers to offer coverage.
  • High Cost to Comply. “Many small companies will have to hire additional workers—and incur higher external accounting expenses—to handle not only the enhanced compliance regulations on health insurance plans but also stricter tax compliance regulations relating to business-to-business transactions.”
  • New Taxes. Obamacare increases the Medicare payroll tax for high-earners and also newly applies this tax to investment income, which will adversely affect small businesses.  Furthermore, this tax will discourage investment in economic growth.

The new health care law does little to encourage or aid small businesses to offer insurance to their employees.  Instead, smaller employers will find it more difficult to offer the federally-defined adequate number of benefits to their employees—especially when the effects of the law on economic growth are factored in.  In order to help small business, Congress should repeal Obamacare and start over.