Affordable Care Chills Most Small Businesses

    By Jeremy Quittner | Small Business

    Two new surveys reveal stark employment concerns for small business owners over new health insurance requirements.

    Uncertainty about the impending implementation of the 2010 Affordable Care Act will lead to slackened hiring for most small businesses over the next two years, according to two new surveys.

    The surveys, released this week by the U.S. Chamber of Commerce and private company data researcher Sageworks, also suggest a great deal of confusion about employer responsibilities under the health care act, which will only be prolonged by delays in the mandate requirements for small businesses. (Unlike individual consumers who must sign up for health care plans starting in October if they are not already covered, small businesses have an extra year to provide health insurance to their employees.)

    The studies also reinforce the general pessimism about unemployment nationally, currently at 7.6 percent, and which has remained stubbornly high since the financial crisis began four years ago.

    "The recent delay in the implementation of the Affordable Care Act, and the uncertainty that accompanies such a delay, won't help the employment situation," Brian Hamilton, chairman of Sageworks, said in a statement. "Private businesses are trying to map out their hiring and investment plans for the next twelve months, and a last minute delay like this will increase the likelihood that companies remain on the fence about hiring."

    Two-thirds of respondents in the Sagework survey said the ACA made it less likely small businesses would hire in the next year, and only two percent said they would be more likely to take on new employees.

    Similarly, only one in five small business owners will add employees in the next 24 months, according to the Chamber, and nearly two thirds said they would not hire in the next year. A quarter of those surveyed cite the national health care law as their biggest obstacle to hiring.

    Despite the extra time owners now have implementing the health care law, it jumped to the top of the Chamber's list of biggest challenges facing small business owners in June, ahead of the economy. Forty-nine percent of small business executives said it was their chief challenge (as illustrated in the Chamber's chart above), an increase of seven percentage points since January. Economic uncertainty emerged as a major challenge for 44 percent of entrepreneurs, steady since the beginning of the year.

    Although the Obama administration has been on something of an informational blitz this summer to inform the public about the new health care options, fewer than a third of respondents in the Chamber survey said they were prepared for the mandate. That includes having an adequate understanding of their requirements for participating in the new health care exchanges.

    More than a quarter of owner respondents said they would cut hours to pare back on full-time employees, and nearly a quarter plan to replace full-time employees who work 30 hours per week (or more) with part-time workers to avoid the mandate.

    The U.S. Chamber survey, which also found that 79 percent of owners believed the new health care would increase health care costs (see chart below), sampled 1,300 executives at businesses with fewer than 500 employee and less than $25 million. Eight hundred of those surveyed are not chamber members. The poll was conducted by Harris Interactive in June and July.

    Sageworks polled 300 professional accountants who work closely with private firms, also in June and July.

    Most small business owners fear the new law will make health care more expensive.

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