Affordable Care Act / Healthcare / Politics

Obamacare’s Effect on Entrepreneurship and Employment

The implications of the Affordable Care Act (ACA) for small businesses and employment status have long been the subject of media and partisan scrutiny. Analyses of these implications are becoming increasingly relevant, as the measures of the ACA will be fully implemented by January 2014.

The shortcomings of the pre-Obamacare health insurance market are well noted, especially in stifling the coverage of self-employed individuals. Since the ACA fundamentally alters the health insurance market, how will it indirectly impact the job market?

In this current market, without full reforms, many health policy experts and economists describe job status and health insurance coverage as being intertwined. Often, this makes employees less likely to leave their jobs for fear of losing their health insurance. However, one of the claims to fame of the ACA is that it no longer exclusively ties high-quality insurance coverage with employment.

Due to this, a recent Medicare study by FKG finds that an average 13% increase in self-employment can be expected as a result of the ACA in the 35 states without prior healthcare reforms. Furthermore, a joint study by the Urban Institute estimates that the number of self-employed people in the United States will increase by 1.5 million nationwide as a result of the universal availability provisions in the ACA.

According to an American Action Forum article, there is evidence that employers with more than 50 employees are increasingly sidestepping ACA mandates to avoid paying for employee health insurance benefits by hiring part-time and temporary employees.  Provisions in the ACA such as the “play or pay” rules, SHOP exchanges, and affordability tests significantly influence the hiring and benefit packages of small companies as well.

On June 26 of this past week, the House Energy and Commerce Oversight subcommittee held a hearing to discuss the ACA and small businesses. Chairman of the subcommittee, Tim Murphy (R-Pa.) said, “Questions remain for families, workers, and employers because there’s a huge gap between what they hoped for and what they got. Good intentions don’t guarantee good results.”

“One wonders if starting a business is even worth the effort,” Jeffrey Kelly, CEO of Hamill Company questioned while testifying at the hearing. “How can I develop a strategy for 2014 when I can’t even manage the costs I’m dealing with today,” alluding to the unpredictable healthcare expenses related to the ACA. “We’ve seen a 46 percent increase in health care premiums over the last two years.”

The implementation of the ACA mandates has been nowhere near flawless. The confusion generated by this ACA rollout process might just influence cash-strapped employers to exploit employment status as a possible loophole. There is a good chance that the swing from greater full-time employment opportunities to greater part-time and self-employment incentives will influence the job status of many Americans.

Even though there has been plenty of educated projection and speculation about the appearance of these trends, the effects remain to be seen. Regardless of what actually will happen, it seems that the implementation of the Affordable Care Act holds the potential to shift the employment paradigm in the United States.

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  1. Pingback: What’s up with all the Obamacare Delays? | Policy Interns

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