The Impact of the Affordable Care Act on Businesses
Sadie Boyd
Webster University
FINC 5000

Abstract
This research paper was created to bring a better understanding on how the Patient Protection and Affordable Care Act affect business, government, and average American. Small business owners have historically had a much harder time providing themselves and their employees with insurance due to rising health insurance costs; meanwhile bigger businesses remain largely unaffected due to the leverage buying large group health plans gives them. This problem has only gotten more severe in the past decade. Today, almost half of America's uninsured are small business owners, employees or their dependents. There are around 44 million Americans who currently are unable to get health insurance. The Patient Protection and Affordable Care Act (PPACA,) signed into law by President Barack Obama on March 23, 2010. Several rationales were offered in support of this legislation, including that it would lead to the creation of jobs and the reduction of the federal budget deficit. Everyone is affected by this health care in one way or another.

The Patient Protection and Affordable Care Act
Consistent with respected economists‟ forecasts, the health care law contains a number of provisions that will eliminate jobs, reduce hours and wages, and limit future job creation. Specifically, the law: * Penalizes employers for failing to offer coverage deemed acceptable by the government; * Imposes burdensome mandates on small businesses, including new paperwork requirements; and * Compounds the uncertainty employers and entrepreneurs are facing amid a challenging economic climate.
Independent analyses have determined that the health care law will cause significant job losses for the U.S. economy: the non-partisan Congressional Budget Office has determined that the law will reduce the “amount of labor used in the economy by … roughly half a percent...,” an estimate that adds up to roughly 650,000 jobs lost. A study by the National Federation of Independent Businesses (NFIB), the nation’s largest small business association, found that an employer mandate alone could lead to the elimination of 1.6 million jobs, with 66 percent of those coming from small businesses. By comparison, then-Speaker Nancy Pelosi (D-CA) stated that “in its life,” the health care law would “create 4 million jobs – 400,000 jobs almost immediately.”
According to an analysis by House Budget Committee Republicans, the health care law will cost the nation $2.6 trillion when fully implemented, and add $701 billion to the deficit in its first ten years. With nearly one in ten Americans looking for work, evidence strongly indicates that the health care law will continue to increase strain on employers and entrepreneurs. The law’s impact will especially be felt by the most vulnerable in our nation’s workforce and small businesses, which create the overwhelming majority of the nation’s new jobs. Immediate steps should be taken to replace it with common-sense reforms to lower costs and protect jobs. Such measures would ease uncertainty for small business owners, entrepreneurs and the average American. Our implementation plan will be disseminate through awareness and address any issues concerning the Patient Protection and Affordable Care Act before it takes effect January 1, 2014. Our main goal is to provide clear knowledge to the American public to allow them to make a rational decision concerning this issue that affects everyone one way or the other.
The concept behind Affordable Care Act (An individual mandate to cope with subsidies for private insurance) goes back as far as 1989, when it was initially proposed by the politically conservative Heritage Foundation as an alternative to single-payer health care. Since that time health care reform was proposed and expanded upon by both parties until it was implemented in Massachusetts by then Governor Romney. During the 2008 elections health care reform became the platform of the Democratic Party. When Barack Obama became president he started trying to pass the 2009 with the Affordable Health Care for America Act. This was followed by The Patient Protection Act, which culminated into the Patient Protection and Affordable Care Act 2010, or for short "The Affordable Care Act". After going through several changes, the Affordable Care Act was signed into law by President Barack Obama on March 23, 2010. Almost 50 million Americans still lack health coverage despite the fact that Affordable Care Act continues to help provide an increasing amount of Americans with access to affordable, quality health insurance. This literature review considers whether the Patient Protection and Affordable Care Act will affect negatively Small Business Owners, Employment and the average American Citizen by responding to the following questions: 1. What is considering Small Business? 2. Why should Small Business Owner care about The Patient Protection and Affordable Care Act? 3. Will the Patient Protection and Affordable Care Act impact employment? 4. How Much Does the Patient Protection and Affordable Care Act Cost The Average American?
By understanding this new healthcare reform it will provide small business owners, entrepreneurs and the average American with a better understanding to be able to decide for yourself what you think about the new health care law, based on the facts and not the talking points.
What is considering Small Business?
The Small Business Administration (SBA), for most industries, defines a "small business" either in terms of the average number of employees over the past 12 months, or average annual receipts over the past three years. In addition, SBA defines a U.S. small business as a concern that: * Is organized for profit; * Has a place of business in the US; * Operates primarily within the U.S. or makes a significant contribution to the U.S. economy through payment of taxes or use of American products, materials or labor; * Is independently owned and operated; and * Is not dominant in its field on a national basis.
The business may be a sole proprietorship, partnership, corporation, or any other legal form. In determining what constitutes a small business, the definition will vary to reflect industry differences, such as size standards.
SBA has established numerical definitions of small businesses, or "size standards," for all for-profit industries. Size standards represent the largest size that a business (including its subsidiaries and affiliates) may be to remain classified as a small business concern. In determining what constitutes a small business, the definition will vary to reflect industry differences. These size standards are used to determine eligibility for SBA’s financial assistance and to its other programs, as well as to Federal government procurement programs designed to help small businesses. Also, the Small Business Act states that unless specifically authorized by statute, no other Federal department or agency may prescribe a size standard for categorizing a business concern as a small business concern, unless such proposed size standard meets certain criteria and is approved by the Administrator of SBA.
Small businesses, which research shows accounts for half of the nation’s GDP and more than half of the private sector workforce are vital in this national debate. In particular, policy makers must consider how to encourage the growth of franchise businesses, which in the past have demonstrated their ability to be engines of economic growth and job creation. The Ewing Marion Kauffman Foundation has shown that most of the new jobs in the economy are generated by businesses less than five years old.
Many franchise businesses have the characteristics suited to high-growth businesses, to scale quickly and generate net new jobs and economic output at rates greater than small, independent businesses.
From 2001-2005, job growth in franchising outstripped the growth of total jobs by 3.3 percent each year.
Why should Small Business Owner care about The Patient Protection and Affordable Care Act?
It is vital for small business owners to be knowledge about the Patient Protection and Affordable care Act because it will affect their entire business process. Affordable Care Act will impose new health coverage costs, the employer mandate, compliance regulations, and new taxes on all businesses. Altogether, these constraints will dramatically affect companies’ per-employee costs; desire to provide health coverage, and motivation to grow in terms of both income and employment.
Affordable Care Act is likely to exacerbate many of the concerns and costs that are already burdening businesses—particularly small-business owners—in at least four ways. 1. Higher Health Care Costs. Affordable Care Act does nothing to reduce the continually increasing costs facing businesses that provide health insurance coverage. In fact, Affordable Care Act’s wide variety of benefit and coverage mandates—combined with new taxes, fees, and penalties—will increase the cost of providing coverage. The increased costs of health insurance might lead employers with fewer than 50 employees to drop coverage if they currently offer it, as there is nothing in Affordable Care Act that would prevent them from doing so. 2. Employer Mandate. Affordable Care Act’s employer mandate forces all employers with more than 50 full-time employees—defined as those who work at least 30 hours per week—to provide health insurance for employees or pay a penalty of $2,000 per employee (excluding the first 30) or $3,000 per employee that receives a premium subsidy, whichever is less. This creates an incentive for businesses to avoid both the penalty and cost of coverage by hiring part-time employees instead of full-time employees, since businesses will not be penalized for failing to provide health insurance to part-time employees. This affects a wide range of businesses, but it hits low-income workers particularly hard. Adjunct professors, certain state government employees, and many fast-food and retail industry workers have already been impacted. 3. Higher Regulation Compliance Costs. Small businesses do not have the capacity to easily take on additional administrative complexities. Many small companies will have to hire additional workers—and incur higher external accounting expenses—to handle the enhanced compliance regulations on health insurance plans. 4. Medicare Taxes on Flow-Through and Investment Income. Affordable Care Act increases the Medicare payroll tax by 0.9 percent and establishes a new 3.8 percent Medicare surtax on unearned (investment) income such as capital gains and dividends for high-income earners. The increased payroll tax, in addition to wage and salary income, applies to “flow-through” business income earned by small businesses. Small businesses are major job creators, and higher taxes on them will slow job creation. Moreover, the wage thresholds on this tax increase are not indexed to inflation and, consequently, will push more small-business owners into this higher tax group as time goes on. The new surtax creates an even greater deterrence to investment than the tax code applied previously. This new extra deterrence to investment will add to the tax code’s already substantial drag on economic growth.
Throughout the summer, Americans for Tax Reform will be highlighting the most outrageous new powers that the IRS will have under the Affordable Care Act law. According to a report from GAO, the IRS is tasked with nearly four dozen new powers under that law. Each day, one will be selected for a brief review.
Will the Patient Protection and Affordable Care Act impact employment?
Labor market distortions are common within the Patient Protection and Affordable Care Act (PPACA/Affordable Care Act). Employers are faced with uncertainty at every turn. As observed from the recently released Federal Reserve beige book, this uncertainty restrains hiring The Patient Protection and Affordable Care Act create jobs in two ways. First, the American citizen tax dollars go to creating millions of new health care jobs. The second way is through small business.
While substantial attention has been given to the employer side, the employee side also experiences many distortion effects. Some of these distortions include incentives to reduce hours, not seek work, drop insurance coverage, drop dependent coverage, become divorced, or avoid marriage. It is apparent that Affordable Care Act’s effects extend far past the number of employees a business will employ, or how many hours a week an employee will be allowed to work.
Affordable Care Act will negatively affect the reward to work for many workers, as noted by University of Chicago economist, Casey Mulligan. According to Mulligan, “The net result of all of this will be to reduce employment, especially among less skilled people.” Many individuals will be left facing tough decisions on whether or not to take a higher paying job or losing thousands of dollars in health care subsidies.
When an individual faces higher tax rates, if they currently have a job, they may roll back on hours worked. Subsidies also have this sort of effect. According to Mulligan, “The [Affordable Care Act’s] subsidies will sharply reduce the financial reward to working because they will be phased out with household income”.
Most Americans will pay higher federal taxes in 2013, even though the tax package Congress passed New Year's Day will protect 99% of Americans from an income tax increase.
The Congressional Budget Office (CBO) also agrees, stating, “The expansion of Medicaid and the availability of subsidies through the exchanges will effective increases beneficiaries’ financial resources. Those additional resources will encourage some people to work fewer hours or to withdraw from the labor market.” The CBO found that the legislation would reduce amount of labor by half a percent.
Under the Affordable Care Act’s system of subsidies, as an individual makes more money, they are rewarded by losing subsidies. This creates a calculation that each person must make—whether or not to strive to increase their personal household income through working more or getting a better job, or choosing to stay in a similar place in life in order to keep the benefits.
In November 2012, the CBO estimated the increase in marginal tax rates due to Affordable Care Act, adding evidence to Mulligan’s claim. According to the CBO, the introduction of the Medicaid expansion and the exchange subsidies would increase marginal tax rates for more individuals. Populations that have Medicaid face marginal tax rates above 75 percent in many instances. In terms of exchange subsides, for income between 100 percent and 133 percent of the poverty level, tax rates increase by 2 percent. For income between 133 percent and 400 percent of the poverty level, increases vary between 9.5 percent and 18 percent.
How Much Does the Patient Protection and Affordable Care Act Cost The Average American?
Health care has always been a huge priority for the American family, so it comes as no surprise that many are now wondering how the Patient Protection and Affordable Care Act (ACA) will impact their lives. In America, the average family consists of two parents, along with approximately two children. Incomes vary, of course, with the average income for a household being $50,500.
The number one concern for most families is simply obtaining health care coverage. Before the ACA, it was estimated that 40.3 million Americans lacked health insurance; nearly one-in-five Americans under the age of 65 did not carry health care insurance.
The coverage problem was caused by a number of factors, according to a Kaiser Foundation study (2010).
First, health care costs were skyrocketing before the ACA, which made premiums unaffordable for millions of Americans.
Many families went uninsured because they were not wealthy enough to afford premiums on their own, but had incomes that were too high to qualify for Medicaid.
Second, those who could not obtain health insurance from an employer often struggled to get insurance in the private market due to pre-existing condition exclusions used by health care insurance companies.
This problem grew worse after the recession of 2007. Many unemployed parents lost their health care coverage, a problem that cascaded down to their children .Those that lacked insurance could still obtain some care, but the care was inadequate and often costly. For example, an uninsured child or parent who got sick would have to be stabilized in the emergency room, but an uninsured person who came down with cancer would not typically have their chemotherapy provided. An uninsured family who was injured in a car accident would be treated for their immediate injuries in an emergency room, but not receive any covered necessary physical rehabilitation afterwards.
Finally, the ACA mandates coverage for all families. With some exceptions, those who decide not purchase health insurance are subject to an annual penalty tax, starting at $95 per adult or one percent of family income, whichever is greater. By 2016, the penalty will be $695 or 2.5 percent of their income, whichever is greater. There are a number of waivers. Groups who will be able to obtain a waiver include those who are poor enough to not have to file a tax return, members of an Indian tribe, those who can prove sincere religious objections to the requirement, and those who can demonstrate that insurance premiums would exceed eight percent of their income.
Conclusion
In conclusion financing health care reform in this fiscal climate will be an extraordinary political challenge, deep divisions persist in Congress, and many thorny problems are nowhere near resolution. Throughout the past century, reformers pursuing comprehensive change in the U.S. health care system have failed to overcome similar barriers. But the fact that reform has failed before does not mean it is fated to fail forever. As the election of Barack Obama vividly reminds us, history is not always repeated. Sometimes it is made.
Hope the above information help you understand the basics of the Affordable Care Act health care plan, so you can decide for yourself what you think about the new health care law, based on the facts and not the talking points. Simply be a law abiding citizen.

Reference
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[ 1 ]. Am I Small Business? . (2013, September 22). Retrieved from U.S. Small Business Administration: http://www.sba.gov/category/navigation-structure/contracting/contracting-officials/small-business-size-standards
[ 2 ]. Kane, T. (2010, July). The Importance of Startups in Job Creation and Job Destruction. Retrieved from Ewing Marion Kauffman Foundation: http://www.kauffman.org/research-and-policy/the-importance-of-startups-in-job-creation-and-job-desctruction.aspx
[ 3 ]. Mountray, C., Johnson, D., Reynolds, J., & Rosensweig, J. (2011, April). Linking Franchise Success with Economic Growth and Net Job Creation. Washington, D. C., USA.
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[ 5 ]. Federal Reserve District. (2013, Marchr 6). Current Economic Condition. Retrieved from http://www.federalreserve.gov/monetarypolicy/beigebook/files/Beigebook_20130306.pdf
[ 6 ]. Mulligan, C. B. (2013, September 22). Health Reform, The Reward to Work and Massachusetts. Retrieved from The New York Times: http://economix.blogs.nytimes.com/2013/03/06/health-reform-the-reward-to-work-and-massachusetts/?_r=0
[ 7 ]. Gamage, D. (2013). Affordable Care Act's Costs to the Working Class. The Wall Street Journal.
[ 8 ]. The Congressional Budget Office (CBO). (2010). The Budget and Economic Outlook: An Update. Washington, D.C.
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