Friday, September 14, 2012

How will Obamacare impact small businesses?

Just how will Obamacare impact small businesses? We have heard all kinds of stories from both sides of the table. Republicans and Democrats all have their own take on Obamacare.

At the recent International Franchise Association convention held in Washington this week we got some ideas from the small business owners that will be directly impacted. That's where Atlanta Taco Bell and Kentucky Fried Chicken franchiser David Barr pulled out his powerpoint showing how funding Obamacare will cut his profits in half overnight.

With simple math the small business folks understood, he spelled out that their only choice is to slash employee hours so they aren't eligible for company-paid health care or stop offering insurance and pay the $2,000 per employee fine. Barr has 23 stores with 421 employees, 109 of whom are full-time. Of those, he provides 30 with health insurance.

Barr said he pays 81% of their Blue Cross Blue Shield policy, or $4,073 of $5,028 for individuals, more for families, for a total bill of $129,000 a year. Employees pay $995. Under Obamacare, however, he will have to provide health insurance for all 109 full-time workers, a cost of $444,000, or two and half times more than his current costs. That $315,000 increase is equal to just over half his annual profit, after expenses, or 1.5% of sales.

As a result, he said, "I'm not paying $444,000." Providing no insurance would result in a federal fine of $158,000, $29,000 more than he now spends but the lowest cost possible under the Obamacare law. So he now views that as his cap and he'll either cut worker hours or replace them with machines to get his costs down or dump them on the public health exchange and pay the fine.

"Every business has a way to eliminate jobs," he said, "but that's not good for them or me." But that's not all. His experience tells him that most low-wage workers he would have to cover under Obamacare won't take it because their $995 share is too high, meaning those the program was set up for won't see any benefit. And those who do will because they have major health issues, likely resulting in higher premiums to him.

This will be the norm throughout the United States. Every business owner will have to deal with the same issues. The result will not be pretty at all.

Check out the latest from the Investor Business Daily Obamacare List

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