The U.S. Supreme Court's 5-to-4 decision put President Obama's health care reform to the test and found that legally its underpinning is strong.
The ruling on the Patient Protection and Affordable Care Act, which came on June 28, was met with cheers by some, and objections from others. When it comes to small businesses, some national organizations have suggested that the Court has made life harder for small-business owners in the U.S.
“Under PPACA, small-business owners are going to face an onslaught of taxes and mandates, resulting in job loss and closed businesses," says Dan Danner, president and CEO of the National Federation of Independent Business, in a statement issued shortly after the announcement by the Court.
Others see it as a victory for small-business owners. Barry Moltz, OPEN Forum contributor and author of Small Town Rules: How Big Brands and Small Businesses Can Prosper in a Connected Economy, says that the decision furthers the notion that insurance should not be tied solely to where you work.
"With the changing nature of the very fabric of employment, this is a victory for solopreneurs and very-small-business owners who will no longer have to remain in a job or pay huge individual premiums to insure their families," Moltz says.
Implications of the Act
In essence, the Supreme Court's ruling affirms that the Obama administration's individual mandate is a constitutional law. As such, almost all Americans must buy health insurance or face a fine.
Limitations were imposed upon how much buy-in individual states must give to the Medicaid program, targeted at the disabled and low-income.
Possible effects of the decision for small businesses are twofold:
Lower health care costs. If Obama's plan works the way it's supposed to, and every American who can afford health insurance buys in, overall costs of coverage—and the premiums attached—should theoretically go down. That's because more participation means a deeper pool of payers, and a lower amount of risk represented by uncovered individuals.
Expensive fines for noncompliance. On the other hand, lower costs in general may be of little consolation to small businesses that exceed the Affordable Care Act's 50-employee threshold. In such cases, the "employer-mandate provision" kicks in. Fines for not covering those 50+ employees can ratchet up to $3,000 per employee per year.
Mike Periu, financial expert and OPEN Forum contributor, says that while the ruling leaves "great uncertainty" in regard to its impact on business operations and HR policies, for some the result will clearly be higher costs.
"What we do know is that payroll taxes, personal capital gains taxes and operating expenses will go up, especially for successful business owners," Periu says. "It also sets the precedent that taxation can be used as a penalty against consumers and business owners to induce them to buy things they may otherwise not want to buy."
Steve Caldeira, president and CEO of the International Franchise Association, says that the act "does not provide solutions to the cost and access issues it set out to address," and as such, his organization will "continue to work with Congress to fully repeal the law."
What's Next: States and the Economy
Now that the act has been deemed constitutional, it is up to the states to set up systems by which small businesses can purchase coverage, as well as define what a small business is, in some cases. According to some experts, this could take several years to work through state legislatures. Therefore, the true impact of the act will likely become clearer closer to its implementation date of 2014.
One essential piece of the Obamacare puzzle—and its impact on small business—is the economic health of the country. Les McKeown, serial entrepreneur, OPEN Forum contributor and author of Predictable Success, says that a vital component in the U.S.'s economic rebound is small-business hiring returning to pre-recessionary levels. For this to happen, he adds, small-business owners need "a stable—or at least predictable—economic outlook."
"Whether or not you agree with the underlying politics," McKeown says, "the Supreme Court decision is at least clear and unambiguous—and therefore good for economic confidence."
James O'Brien is a correspondent for Boston University's Research Magazine and The Commons, a journal covering higher education. He has written extensively as a news correspondent for The Boston Globe. James blogs via Contently.com.
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