Will Small Businesses Cut Staff to Comply With Health Reform?

Small-business owners have plenty to worry about: high energy costs, the struggling economy, complicated tax codes. But their biggest concern, they say, is the 2010 Affordable Care Act (ACA), with its requirement that employers provide health insurance. Even with the implementation of that part of the healthcare law delayed, some businesses plan to take drastic measures because of it, according to the latest quarterly survey by the U.S. Chamber of Commerce  (opens in a new tab) [PDF].

A sizable number of small-business owners responding to the survey said they will cut full-time employees’ hours (27 percent) or replace them with part-time workers (23 percent) because of “Obamacare.” Some fast-food restaurants, for example, are considering hiring only part-time workers, NPR reports  (opens in a new tab).

Why cut staff? The healthcare law’s employer mandate penalizes businesses that have 50 or more full-time employees if they do not offer insurance. For the law’s purposes, “full-time” is defined as working more than 30 hours each week. Businesses that don’t comply will pay a penalty of $2,000 per employee, though the first 30 are exempted.

Nearly a quarter of small-business owners (24 percent) said they will reduce hiring to remain under 50 employees, while 71 percent said the healthcare law makes it harder to hire.  (opens in a new tab)

In early July, the Obama administration pushed back the date when the mandate will go into effect from 2014 to 2015. That may provide some relief to the 61 percent of small-business owners surveyed who said they are not prepared for the various requirements of the healthcare law.

Other ACA provisions, however, will be implemented at the end of 2013. One is the establishment of health insurance exchanges, online marketplaces where the uninsured can buy coverage. Only 30 percent of small businesses are prepared to participate in these marketplaces, according to the survey. Washington, DC,  and 17 states will implement their own exchanges, and small-staff associations located in the District have expressed concerns.

The nearing implementation of the exchanges may explain why anxiety over the law is increasing. Concern about Obamacare is up 4 percentage points since last quarter and 10 points since June 2011, according the the Chamber of Commerce

How is your association preparing for implementation of the Affordable Care Act? Let us know in the comments.

(Photodisc/Thinkstock)