Research and Commentary: Effects of Obamacare on Businesses and Employment

Published July 30, 2013

There has been much debate over how the Patient Protection and Affordable Care Act will affect business decisions and job creation.

On July 2, the Obama administration announced the Affordable Care Act’s “employer mandate” will be pushed back a year to begin on January 1, 2015. The mandate requires employers with 50 or more full-time employees to deliver health care coverage or pay a $2,000 penalty for each employee after the first 30 workers.

Despite the administrations’ delay, businesses making hiring decisions must consider the additional expenses that will be created by the mandate once it goes into effect.

According to a survey by the U.S. Chamber of Commerce, 71 percent of small businesses say the health care law makes it more difficult for them to hire. Energy and Commerce Committee Chairman Fred Upton (R-MI) stated, “These statistics are not just projections on a sheet of paper. They have significant consequences as millions of American workers will see lower wages and less take-home pay because of the law.”

In a Gallup poll of 603 employers whose businesses have less than $20 million in annual sales, 41 percent said they have frozen hiring because of the health care law, and 19 percent answered “yes” when asked if they had “reduced the number of employees in your business as a specific result of the Affordable Care Act.” Only 9 percent of the small employers agreed Obamacare would be “good for your business.” Eighteen percent have “reduced the hours of employees to part-time” in anticipation of the ACA’s effect, the poll found.

Andrew Puzder, CEO of CKE Restaurants, questioned the Affordable Care Act’s feasibility in a Wall Street Journal op-ed. CKE Restaurant general managers earn an average of $50,000 per year. Should they decline insurance coverage, they will pay the initial penalty of $500 and a maximum penalty of $1,250. The estimated employee health insurance premium through the company plan will “range between $2,000 and $3,000 per year, well in excess of any potential penalty.” Puzder fears the ACA could cause the number of covered employees to decrease because the consequence for declining coverage will be low compared with the cost of coverage.

The Affordable Care Act will increase the financial burden on businesses and employees. As a result, employers will be much less likely to take on new commitments like expanding, hiring new workers, or even maintaining the full-time employees already in place. Once businesses are released from health care costs, their employees will go to the government to get coverage, which will shift the cost burden to taxpayers.

The following documents provide additional information about the effects of Obamacare on businesses.

U.S. Chamber of Commerce Q2 2013 Small Business Survey
A survey released by the U.S. Chamber of Commerce finds government policies continue to “hamper hiring and growth, with over a quarter of small business saying they have lost employees in the last year.”

What Delaying Obamacare Means
Within the next few weeks, the U.S. House will vote on defunding and delaying President Obama’s health care law. Benjamin Domenech, managing editor of Health Care News and a research fellow at The Heartland Institute, discusses what impacts this would have.

Obamacare: Impact on Businesses
In light of the new regulations, taxes, and numerous indirect costs on businesses of all sizes, John L. Ligon of The Heritage Foundation calls on Congress to repeal Obamacare, start over, and get health care reform right.

A CEO’s Eye-View of Obamacare
In a Wall Street Journal op-ed, Andrew Puzder, CEO of CKE Restaurants, questions the Affordable Care Act’s viability and discusses his concerns for his business and his employees.

How Obamacare Impacts Small Businesses
In a “Heritage Investigates” blog post, Rob Bluey discusses the many impacts small businesses will bear, including new regulations, mandates, taxes, and numerous costs, as a result of Obamacare. 

Obamacare Hits School Districts, Employees
In a Health Care News article, Evelyn B. Stacey, a graduate of Pepperdine University’s Graduate School of Public Policy, notes the health care law’s mandates are causing schools to “fire employees, reduce employee hours, and otherwise slash education spending.”

Committee Learns How Health Care Law Hurts Job Creation, the Economy and Workers
A House Subcommittee on Health hearing on “Obamacare’s Impact on Jobs” found businesses will experience higher costs and greater regulatory burdens as a result of Obamacare, which will affect workers, wages, employer-sponsored health coverage, and job creation.

ObamaCare: the Burden on Small Businesses
Michael F. Cannon, director of health policy studies at the Cato Institute, summarizes the additional burdens and uncertainty small businesses will endure as a result of Obamacare, which he concludes might make them unlikely to expand.

Will Obamacare Hurt Jobs? It’s Already Happening, Poll Finds
A CNBC article cites a Gallup poll stating only 9 percent of the small employers surveyed agreed Obamacare would be “good for your business.”


Nothing in this Research & Commentary is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. For further information on this subject, visit The Heartland Institute’s Web site at, and PolicyBot, Heartland’s free online research database at

If you have any questions about this issue or the Heartland Web site, contact John Nothdurft The Heartland Institute’s director of government relations at [email protected] or 312/377-4000.