Obama’s Law Could Wreak Havoc on Texas Small Businesses

Published October 30, 2012

Even if you’ve been the nation’s leading job-creating state for the past four years, President Obama’s health care law is going to have an effect. Texas small businesses expect Obama’s law to impact them in a profoundly negative way.

According to calculations by the National Federation of Independent Business (NFIB), there will be 6,000 fewer jobs in the Lone Star State by 2021, with 3,300 subtracted from small businesses. The organization also predicts $3.1 billion in lost sales for Texas businesses due to ObamaCare.

Other notable costs for Texas businesses cited by the study will be more than $9.3 billion in mandated costs and penalties paid through 2019 due to this legislation. Will Newton, the NFIB’s Texas executive director, said, “no one should be surprised when the penalties are passed on to consumers in the form of higher prices.”

Will Hit Job Producers

According to the Texas Public Policy Foundation (TPPF) and co-authored by Arlene Wohlgemuth, director of TPPF’s Center for Health Care Policy, even though Texas is in good economic condition now compared to other states, it is going to take a hit from the implementation of Obama’s law.

“Texas small businesses can do very little to protect themselves from the effects of ObamaCare,” said Wohlgemuth. “They cannot grow above 49 employees in order to escape the employer mandate.  There is no protection for most of these businesses. They will not be able to insure their employees, and the resulting fine will exceed their total profit.”

Wohlgemuth said job producers in other states will be harmed as well.

“We agree with those who attribute the economic malaise in large part to the fear businesses have of the impact of ObamaCare on their bottom line,” said Wohlgemuth. “The tragedy of ObamaCare is that health care reform was and is needed, but this legislation goes in the opposite direction of the kind of reform that will lead to lower costs and better care.  It was not only an opportunity missed; it made far worse an already bad situation by rejecting free-market reforms in favor of more government control.”

Raising Employment Costs, Unemployment

Devon Herrick, a senior fellow with the National Center for Policy Analysis (NCPA) in Dallas, Texas, agrees, saying Obama’s law will drive up labor costs by increasing the cost of employing workers.

“Health insurance is merely a form of noncash compensation. Workers pay the cost in reduced take-home pay. If an employer is forced to provide health coverage that workers are unwilling to buy on their own, the result is akin to a tax on labor that makes employing workers more expensive,” said Herrick. “The end result is that low-income workers will be harmed when they find that firms can no longer afford to hire them.”

Herrick notes calculations by the NCPA have found the minimum “health wage” cost is about $6 per hour. Combined with the federal minimum wage of $7.25 per hour, the least it will cost to employ even a low-skilled worker is about $13.25 per hour—about $27,500 per year.

“Workers who lack the skills to be worth $27,500 annually will have a difficult time finding a job,” said Herrick.

Every State Harmed

Dr. Roger Stark, a physician and health care policy analyst at the Washington Policy Center, says every state will feel the sting of Obama’s law on hiring.

“We are seeing just the tip of the iceberg. It will come down to a financial decision that every employer will need to make: pay the fine/tax of either $2,000 or $3,000 per employee or provide health [care] benefits at an average cost—at least in the state of Washington—of $8,000 to $12,000 per employee,” said Stark.

“Employers I talk with are totally up in the air as far as hiring is concerned. They really are uncertain as to the cost and regulatory burden of Obama’s law. Unless the law is repealed, or seriously altered, all of us will have to deal with that,” added Stark.


Internet Resources:

“The Impact of PPACA on Texas Business,” Texas Public Policy Foundation: http://www.texaspolicy.com/center/health-care/reports/impact-ppaca-texas-business