ObamaCare: the Burden on Small Business



Michael F. Cannon is director of health policy studies at the Cato Institute and co-author of Healthy Competition: What’s Holding Back Health Care and How to Free It.

By Michael F. Cannon (@mfcannon)

How will ObamaCare affect a small business owner who's married with two kids?

For one thing, he and his business will pay higher health premiums beginning this year. 

He and his employees will have to purchase unlimited lifetime coverage and unlimited annual coverage (this requirement phases in between now and 2014).  The Obama administration estimates that these mandates alone could increase premiums for some businesses by 7 percent.

He and his employees will have to purchase coverage for dependent children without any waiting periods for pre-existing conditions.  Another mandate will require them to purchase coverage for dependents up to age 26.  One private estimate puts the cost of this “slacker” mandate an average of 2 percent, but our small-business owner’s premiums may rise even more.  Perversely, the cost may force him to drop dependent coverage entirely.

If his health plan loses its “grandfathered” status—as most small businesses will—he and his workers will have to purchase 100-percent coverage for a long list of preventive services. The administration estimates this mandate will increase premiums on average by 1.5 percent, but private estimates are in the range of 3-4 percent.

The Obama administration also acknowledges there is “tremendous,” “substantial,” and “considerable” uncertainty about these mandates’ costs.  That is, they may be higher than the administration says.

These mandates are a double-whammy for our small-business owner.  He already faces some of the highest premiums out there.  Yet he also provides some of the least comprehensive health plans.  So his premiums will rise more than larger employers’ premiums will.

According to HHS, these added costs will likely push him to switch health plans, and he will likely switch to a plan that complies with the mandates, but places tight restrictions on accessing care.

If he offers his workers a health savings account (HSA), medical savings account (MSA), flexible spending account (FSA), or health reimbursement arrangement (HRA), its employees will lose the ability to purchase over-the-counter drugs tax-free.  If they make non-medical withdrawals from their HSA or MSA, the penalty will double from 10 percent to 20 percent.

If his small business is a tanning salon, it is already paying a new 10-percent tax on its sales.

The Obama administration is quick to note that beginning in 2010, one third of small businesses may be able to get a tax credit that covers up to 35 percent of their health-benefits.  But that credit is not a long-term solution to rising costs; it disappears after 6 years, and often sooner.  It will also discourage hiring, because hiring too many workers will reduce or eliminate the credit.

By 2013, all businesses will have to fill out an IRS Form 1099 every time they purchase more than $600 worth of stuff from a vendor.  If our small-business owner owns a trucking company, he will have to ask gas stations for their tax ID numbers.  If the gas stations don’t cooperate, he will have to withhold money (i.e., send it to the IRS) for gas expenses.  This will be the biggest nightmare in the bill for small businesses.  Ironically, it will also hit many doctors, journalists, and others who supported ObamaCare, but run their own small business on the side.

If our small-business owner and his wife make over $250,000, they’ll pay the new, higher Medicare “payroll” tax of 3.8 percent, starting in 2013.  (It’s currently 2.9 percent).

But it’s 2014 where things really get messy.  That’s when the government will require everyone to purchase even more yet-unspecified types of coverage, which will cause premiums to rise even more.

If our small-business owner has 50 or more employees – or fewer full-time employees and lots of part-timers – he faces the prospect of tens of thousands of dollars in penalties under ObamaCare’s employer mandate if he does not provide “adequate” coverage to his workers.

The worst part is that these penalties will be triggered by factors that are unpredictable, unobservable, and totally beyond the control of our small-business owner.  He could get hit with those penalties simply because a worker’s spouse loses or changes jobs.  Or if a worker’s spouse moves out or dies.  Or if an employee’s parents move in.

This creates so much uncertainty that a small-business owner with 55 employees may have to fire six of them just to eliminate that potential liability.

But if he splits his 60-employee small business into two 25-employee businesses, then the federal government—maybe the IRS—will start snooping around to determine whether he did so for legitimate business reasons or just to avoid the mandate.

No matter the size of his firm, if he or his workers earn around $30,000 to $100,000 and get coverage through one of the new health insurance exchanges, their implicit marginal tax rates will jump from around 30-40 percent all the way up to 60-75 percent!

In many cases, if his employees get a raise or work more hours, ObamaCare will leave them with less take-home pay, because the higher earnings will cause them to lose thousands of dollars in subsidies.  Their implicit marginal tax rate will exceed 100 percent!

Our small-business owner is paying all these costs now – and so are his workers, and the unemployed.

ObamaCare has created enormous uncertainty.  Our small-business owner doesn’t have any idea what ObamaCare’s mandates will cost him in 2011, 2012, 2013, or 2014.  Or what additional benefits he will have to provide.  Or what kind of insurance options will be available by then.  All he knows is that these things will cost him more – possibly a lot more – and that he’s going to be spending lots of time and money, for the foreseeable future, on tax accountants and attorneys.

And he’s going to be much less likely to take on new commitments like expanding or hiring new workers.

Michael F. Cannon is director of health policy studies at the Cato Institute and co-author of Healthy Competition: What’s Holding Back Health Care and How to Free It.

Apparel company The North Face recently stated that it would no longer make jackets for oil and gas companies because it doesn't want to be associated with the fossil fuel industry. In response, Colorado-based oil and gas company Liberty Oilfield Services rented full billboard ads to remind The North Face of the truth: "Globally, 60% of all clothing fibers are made out of oil and gas. For North Face, it is likely 90% or more."

Liberty CEO Chris Wright joined Glenn Beck on the radio program Tuesday to discuss just how much of our economy — beyond outdoor apparel and energy — wouldn't exist in a world without fossil fuels. And he warns that many companies are now deeming this truth to be "controversial."

"I have been for years, trying to get a real, honest dialogue about energy going," Chris told Glenn. "So we took this opportunity to point out that North Face jackets are ... almost completely made out of oil and gas. How can you choose not to associate with the essential material your equipment [is] made out of? So we put a billboard up ... the billboard says, 'That North Face puffer looks good on you. And it was made from fossil fuels.'"

"Most billboard companies did not want to run that billboard. They thought it was controversial," he added. "And Facebook put a hold on our brief video just saying the jacket looks good, this is what it's made out of. In today's world, that is controversial."

Watch the video below to catch more of the conversation:

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During a lecture at the Yale School of Medicine's Child Study Center, a New York City-based psychiatrist told students and faculty that she fantasizes about "unloading a revolver into the head of any white person that got in my way," among several other shockingly race-hating statements.

In April, Dr. Aruna Khilanani — a New York-based forensic psychiatrist and psychoanalyst — delivered the talk called "The Psychopathic Problem of the White Mind" virtually as part of the Yale School of Medicine's "Child Study Center Grand Rounds," a lecture program for "trainees in child psychiatry, psychology, and social work, faculty, clinicians, and scientists."

On the radio program Monday, Glenn Beck shared several quotes from an audio recording of the lecture provided by Bari Weiss, a former opinion writer and editor for the New York Times.

Here are a few of Khilanani's statements from the audio:

  • "This is the cost of talking to white people at all. The cost of your own life, as they suck you dry. There are no good apples out there. White people make my blood boil."
  • "I had fantasies of unloading a revolver into the head of any white person that got in my way, burying their body, and wiping my bloody hands as I walked away relatively guiltless with a bounce in my step. Like I did the world a f***ing favor."
  • "White people are out of their minds. And they have been for a long time."
  • "White people feel that we are bullying them when we bring up race. They feel that we should be thanking them for all that they have done for us. They are confused, and so are we. We keep forgetting that directly talking about race is a waste of our breath."
  • "We are asking a demented, violent predator who thinks that they are a saint or a superhero, to accept responsibility. It ain't gonna happen. They have five holes in their brain. It's like banging your head against a brick wall. It's just like sort of not a good idea."

"We must take a stand. We must speak out, because this is evil," Glenn said in response to Khilanani's shocking lecture. "I don't care who you voted for, you know this is evil."

Watch the video below for more details:

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The prices of our houses and food are already rising fast, but they will skyrocket to record highs if we don't fix the problem soon. So what's causing the inflation?

On the radio program this week, Glenn Beck said he doesn't believe it's the fault of our loggers, farmers, or truckers — many of them are really struggling. But the big corporations that control these industries are making record profits, all while the Biden administration is making some very odd decisions that could make the crises even worse.

Watch the video below for more details:

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The crisis at the border continues to worsen, with the U.S. Border Patrol recently releasing some shocking statistics that illuminate just how bad the situation has become. But Texas Governor Greg Abbott (R) is doing everything he can to prevent any additional unlawful crossings into the Lone Star State.

Abbott joined Glenn Beck on the radio program Wednesday to describe recent action he has taken to ensure that those who do cross into Texas illegally know they came to the "wrong state."

After noting that both President Joe Biden and Vice President Kamala Harris "have completely abandoned post as it concerns the Texas border," Abbott explained how "Texas is stepping up" to combat the flood of dangerous gangs and cartels, human traffickers and drugs he says are pouring into border communities.

"Beginning in March, I deployed a thousand Texas Department of Public Safety officers to the border. I deployed the National Guard to the border. And they made well over a thousand arrests of some of these criminals we talked about. They've apprehended more than 33,000 illegal immigrants coming across the border." Abbott said. "But because of the way the Biden administration has abandoned the border, we are now elevating our game. What I did yesterday, in response to more than a dozen counties along the border ... I granted their request for a disaster declaration," he added.

Abbott went on to describe how his disaster declaration gives Texas the authority to toughen penalties for lawbreakers, including criminal trespassing, smuggling, and human trafficking.

"We're going to begin arresting everybody coming across the border and charging them with criminal trespass and putting them in jail. They are coming in here, thinking they'll get the Biden free-ride, and go wherever they want to go. Not in the state of Texas. We'll start arresting them right and left, and putting them behind bars, and saying they came in to the wrong state."

Asked by Glenn if he is prepared for the inevitable "media onslaught", Abbott simply answered, "We're prepared to see a reduction in the number of people coming across the border — because Texas is enforcing the law, period."

Watch the video clip below for more:


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To enjoy more of Glenn's masterful storytelling, thought-provoking analysis and uncanny ability to make sense of the chaos, subscribe to BlazeTV — the largest multi-platform network of voices who love America, defend the Constitution and live the American dream.