The Economic Impact of Healthcare Reform on Small Businesses

Thesis: In the face of new healthcare mandates created by the Small Business Health Options Program (SHOP) Act of 2009, the costs of providing required medical care will force small businesses to make employee healthcare coverage choices which will impact job growth.

I. Small businesses must weigh the difference between the cost to offer coverage and the government fine for non-compliance.

A. Small businesses who offer coverage must cover no less than 72.5% of the cheapest health plan offered for individuals, and no less than 65% for families.

B. In addition, employers must automatically enroll every employee in a health plan with the lowest employee premium - unless they opt out.

C. Small businesses who do not offer coverage must pay the Health Choices Commissioner (SHOP Plan) 8% of average wages paid during a predefined period.

D. Small businesses that fail to provide coverage or pay SHOP fees will be fined $100 per violation day.

II. Fewer incentives for entrepreneurs to grow their business will have a negative impact on hiring and productivity gains in the United States.

A. Small businesses that employ less than 50 people (one of the thresholds in the legislation for tax penalties and compliance requirements) are holding off on hiring any new employees until they can get a better handle on what their costs is going to be under the new legislation.

B. Small business owners may decide not to grow their human capital merely to stay below the 50 employees to avoid the mandate.

C. If small businesses don't expand, the economy could be impacted with lower expansion and growth, which will trickle down to lower hiring rates and GDP growth.

III. Driving growth and innovation, small businesses play an important role in the United States economy. Small businesses are now faced with healthcare coverage decisions that will not be helpful to the current employment situation in the country.