Michael Barrera: Challenges Faced by Small Business Due to Obamacare

As our country’s economy continues to struggle we are left with an unemployment rate of 8.6%, including an even higher rate of 11.4% rate in the Hispanic community. This number does not include those who have given up looking and finally dropped out of the job market. The lack of jobs has also led to increased poverty as a Census report shows that a record number of Americans -- nearly 1 in 2 -- have fallen into poverty or are scraping by on earnings that classify them as low income.

The job market continues to lag despite the fact that businesses are sitting on over a trillion dollars of funds. These businesses refuse to invest in expansion or hire new employees due to the current economic uncertainty, the national debt and the growing costs of regulations. The small business sector, which is the nation’s largest employment sector accounting for 60 to 80% of all new net jobs, is also hesitant to expand and hire due to a deteriorating business climate.

In a recent study conducted by the U.S. Chamber of Commerce, small business owners stated their biggest challenges are:

1) Economic Uncertainty- 49%;

2) The National Debt- 47%;

3) HEALTH CARE- 39%;

4) Over Regulation- 36%;

and 5) Taxes- 28%.

Next to the state of the economy and the debt, the most specific fear for small business comprises the impending health care regulations which are proving to be difficult to decipher and threaten profitability. Additionally, as small businesses become better educated on ObamaCare they are slowing down their hiring, and/or just dropping employer sponsored health care for their employees. According to Mckinsey & Company - one of the world’s most respected management consultants - 30 percent of employers will definitely or probably stop offering Employer Sponsored (Health) Insurance (ESI) in the years after many of the ObamaCare’s rules and regulations take effect in 2014. Among employers with a high awareness of the law, this number increases to more than 50 percent. Moreover, close to 60 percent of employers will pursue some alternative to traditional ESI. Additionally, Mckinsey found that at least 30 percent of employers would gain economically by dropping ESI, even if they completely compensated employees for the change through other benefit offerings or higher salaries.

It should also be noted that many small business owners who change or drop their employee health care coverage will be personally hurt. For example, a Hispanic small business owner who has been in business for over 20 years in Colorado and employs close to 200 employees stated that after becoming more aware of the new requirements imposed by ObamaCare, he believes his business cannot afford the new mandates. He further stated it would be cheaper to just pay the fines, thereby requiring his employees to use government-run health care. This is more than just a “cold hearted” business decision as many of those who work for him are actually extended family or long term employees he is personally close to and cares about.

In addition to forcing his employees to fend for themselves with the government-run health insurance, he and his immediate family will also lose the cost benefits of being part of a group insurance health plan. This will also cost him considerably more money because he, along with members of his immediate family, have pre-existing conditions who will now be forced to purchase considerably more expensive individual family health insurance. Additionally, the current economy and the pending health insurance costs have forced him to lay off some employees, including family. There are no immediate plans to hire new employees.

Another Hispanic business owner, who owns several restaurants throughout Texas, stated his business is currently in good shape financially and has substantial money on hand. However, due to ObamaCare’s impending costs to his business and the uncertainty of the law’s mandates, he has halted all plans for expansion - including the opening of new restaurants. This translates into less work for potential contractors, fewer hours for his current employees and fewer new hires. These expansion plans would have allowed him to grow financially and provide economic opportunities for others.

Research by the Heritage Foundation found there is a direct corollary to job losses ObamaCare will have on the economy – estimated to be 670,000 jobs annually. Analyzing figures from the Bureau of Labor, the Heritage Foundation found that between January 2009 and April 2010 private sector job creation improved by over 67, 000 net jobs per month. However, once ObamaCare passed in the spring of 2009, private sector net job creation improved by only 6400 jobs per month.

While the slowdown in hiring may not be entirely attributable to the law’s passage, it is obvious the law had a chilling effect.
When it comes to health care, the Obama Administration had a laudable goal to help insure more Americans. However, rather than address the costs of health care to make it more affordable, the Obama administration decided creating another bureaucratic monster to “improve”people’s lives would better fit his political necessities.  The President should have employed free market principals by creating the right conditions for increased competition among insurers by allowing small businesses and their various trade associations to purchase health insurance across state lines; a concept supported by Bill Clinton and the former chair of the Small Business Committee, Representative Nydia Velasquez. The Administration should have also sought to improve efficiencies by cutting regulations from the system; instead we just got a ton more.

If the government really wants to solve problems, it should address the costs of “anti-litigation medicine” practiced by doctors who have to order extra tests and procedures to protect themselves against medical malpractice lawsuits - an issue the President promised to address.

The current law exposes small business owners to more government regulation, bigger government bureaucracy, and a growing uncertainty about the law’s costs and regulations. The conditions created by ObamaCare are job killers. In the long run, more and more businesses will stop providing health care causing more people to use government-run health care. This leads to more government spending, further exacerbating small business’ second biggest fear-the exploding national debt.
Before passing legislation we should demand our lawmakers to read the law in its entirety and have an idea of the proposed law’s economic effects.

President Obama loves referencing the term of jobs ‘created” or” saved” as a way of proving his policies are working. He needs to be honest with the American people and start telling us about the number of jobs “lost” and jobs “that will not be created” as a result of his policies.

Let’s HOPE he does what is necessary to CHANGE what is needed to help small business expand and begin hiring again so that we can get America back to work.

Michael L. Barrera is Regional Director of The LIBRE Initiative, and formerly served as President  & CEO of the United States Hispanic Chamber of Commerce and as National Ombudsman of the Small Business Administration.

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