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Small Businesses Share Real-World Obamacare Effects with Congress

WASHINGTON – Many small businesses remain perplexed about the responsibilities being saddled on them by Obamacare, but federal officials insist the new law will help employers provide their workers with quality coverage at affordable prices.

And while some “glitches” require additional attention, in the view of Sen. Mary Landrieu (D-La.), chairwoman of the Senate Small Business and Entrepreneurship Committee, “we’re not going to go back to the time before people had affordable insurance.”

The impact of the controversial Affordable Care Act was the subject of a sometimes heated discussion before Landrieu’s committee, with several small-business owners asserting the new requirements will place an unbearable burden on their enterprise while others praised the law’s objective of providing new healthcare opportunities.

“The ACA isn’t perfect and it won’t solve all of our health insurance problems overnight,” said Jamal Lee, the owner of Brescia Studios, an audio, lighting, and video production company in Laurel, Md. “However, it is the first meaningful law in decades that meets many of small businesses’ core needs in regards to rising healthcare costs. In this fragile economy, policies that allow us to spend less on health premiums so we can keep more of our profits to reinvest in our companies and create jobs are what we need the most.”

But Larry Katz, president and CEO of six Dots Diners based in Metairie, La., told the panel he may have to sell off some of his restaurants to escape the burden of the new law.

“While there is no question that the federal government needs to reform and strengthen our healthcare system, I believe that the law as currently written will negatively impact job growth, startups and expansions and raise prices, not just of healthcare, but of all products and services that we buy,” Katz said. “It certainly has had a direct effect on my company and I anticipate it will leave me in a position of being less competitive with other local restaurants going forward.”

Sen. James Risch (R-Idaho), the committee’s ranking member, called the new law “bologna” and asserted that it should be ditched altogether.

“Let’s go back to what we have that does not do harm to the situation in American today,” Risch said. “It is just disgusting what has happened as far as the federal government having botched this as badly as it has.”

Risch joined 11 other GOP senators in signing a letter to Senate Democratic Leader Harry Reid, of Nevada, informing him they will not support a short-term spending bill when the fiscal year closes on Sept. 30 if it provides money to implement Obamacare. The letter maintained the law is “a failure that will inevitably hurt businesses, American families and the economy.” Thus far, Republican leaders in both the House and Senate have refused to back the effort led by Sen. Mike Lee (R-Utah).

Under the Affordable Care Act, businesses with 50 or more full-time employees will be required to provide them with health insurance. That mandate was supposed to go into effect in January 2014, but President Obama recently delayed implementation until January 2015 to provide businesses with additional time to sort things out.

Once Obamacare goes into effect, small businesses can look to the newly created health insurance exchanges in each state offering a health insurance marketplace where individuals and small businesses can compare policies and premiums and purchase insurance. Businesses will be penalized $2,000 per employee for failing to comply, with the first 30 employees exempted.

Relatively few businesses are expected to be affected by the law. Of the approximately 210,000 businesses operating in the U.S., 96 percent have fewer than 50 full-time employees, leaving them beyond the reach of the act’s provisions.  Of the remaining 4 percent, 96 percent already provide coverage, meaning .02 percent of businesses with 50 or more full-time employees will be required to comply with the law’s dictates.

But concerns remain, according to William J. Dennis Jr., a senior research fellow at the National Federation of Independent Business, who expressed fear that Obamacare will dampen economic growth. And he questioned the need for an employer mandate.

“If it is simply a means to raise revenue, most would not consider it good tax policy,” Dennis said. “But if it is a means to increase health insurance coverage, it is creating huge dislocations and considerable costs for little if any return.”

The Urban Institute estimates the employer mandate will add about one million people.

“Unless one assumes that large employers would soon start massively dumping of their health plans, coverage is largely unaffected by elimination of the employer mandate,” he said.

Kevin Settles, CEO of the Bardenay Restaurant based in Boise, Idaho, said there remains “a tremendous amount of uncertainty surrounding” Obamacare.

“This uncertainty has been a key factor in extending the longest time period without expansion in all my years as an independent businessman,” Settles said. “More than three years after the law’s enactment we still do not know if it will make it easier for employers like me to cover more employees or not and for those of us with the goal of growing a business, this whole thing has just gotten much more complex.”

Katz said he has an unusual problem. His restaurants maintain 65 full-time employees, placing them under the mandate and requiring him to either provide health insurance or pay the fine. Because of its current size, the business doesn’t qualify for the sort of subsidies offered to smaller companies under the act and it doesn’t have the group buying power that provides lower premiums for businesses with over 200 workers.

“We are caught in the unintended donut hole,” Katz said. “And thus, we will be saddled with the options of either dropping our current health insurance plans and pay the penalty or cover 100 percent of our employees and incur its resultant much higher costs.”

Katz said he has decided to drop coverage and pay the fine, which should come to about $70,000 – still less than it would cost to cover all his employees. And he is considering selling or closing two restaurants to bring his ranks below 50 workers, removing the business from the act’s dictates.

Landrieu agreed that Katz is facing difficult circumstances and expressed her intention to look into the situation and try to ease the problem. But she also noted that before passage of the Affordable Care Act small businesses were paying healthcare insurance premiums at a rate 18 percent higher than larger companies.

And the law is producing additional benefits, she said, like the awarding of tax credits to those small businesses already providing coverage for their workers.