During a June 26 hearing, members of the House Energy and Commerce Subcommittee on Oversight and Investigations and a panel of experts and small business owners discussed the impact the Affordable Care Act (ACA) has – and will have – on the business community. The first hearing panel consisted of four small business owners, while the second panel comprised four trade association and business community advocates who shared their concerns and recommendations about various provisions of the new healthcare law.

Rep. Fred Upton (R-MI) claimed that as a result of the law’s implementation, businesses are forced to make “gut wrenching decisions” such as whether to keep their employees, reduce their hours, or eliminate the provision of health benefits altogether. By way of example, Upton said that one medical device manufacturer in his home state plans to lay off 1,000 employees because of the ACA’s tax provisions.

Ranking subcommittee member Diana DeGette (D-CO), however, touted the ACA’s medical loss ratio (MLR) requirements, among other provisions. These requirements, she claimed, will ultimately reduce medical costs.

Industry Perspective

Several trade association representatives and business advocates described the portions of the ACA that concern them the most. Katie Mahoney, Executive Director of Health Policy with the U.S. Chamber of Commerce, noted that while the Chamber opposed the law’s implementation, the organization is moving forward to help employers comply with the law and work with regulators to mitigate the burden the law will impose. Notably, she claimed that on the whole, the law is eroding the employer-sponsored health benefits system. Specifically, she said the law will require employers to reduce hiring, work hours, and plans for expansion.

Among other recommendations, the Chamber is “encouraging the Treasury to use its discretion to not tax the tax.” Instead, the U.S. Treasury should “exclude the portion of the premiums collected to pay for the health insurance providers’ fee from gross income for reporting purposes. This important and feasible regulatory approach would save small businesses unnecessary premium increases of between 45 and 70 billion dollars over the next 10 years.”

Mahoney also advocated that Congress change the current definition of “full-time” employee under the Act from 30 to 40 hours per week, which she claims is a “critical step in the right direction.” Recently, lawmakers introduced bipartisan legislation that would accomplish this end.

Finally, Mahoney urged agencies to take a “compliance assistance approach” instead of one of enforcement.

Neil Trautwein, Vice President and Employee Benefits Policy Counsel with the National Retail Federation echoed Mahoney’s concerns, particularly with respect to changing the definition of “employee” under the ACA. According to Trautwein, “most employers consider 40 hours a normal full-time workweek.” He recommended that Congress consider a delayed or soft rollout of many of ACA’s provisions in order to give employers time to adjust to the new requirements. He noted that currently, much time, effort and money is “being spent on compliance instead of sales.”

Michelle Neblett, Director of Labor and Workforce Policy with the National Restaurant Association agreed that legislative action is needed. Restaurant and food service operators rely significantly on part-time and seasonal employees, she explained. Defining full-time employee under the law is the biggest challenge for her industry. If the definition is not changed, she testified, the flexibility inherent in the food service industry will no longer be widely available. She noted also that the ACA’s automatic enrollment provision will cause an administrative hardship for many businesses.

On the other hand, Bill Daley, Legislative and Policy Director of the Main Street Alliance, which represents about 1,000 small business owners, spoke in favor of the law. He said that many of his constituent businesses support the ACA, as the biggest challenge they faced beforehand was affordability of health care coverage. He said the law will simplify paperwork and slow the rising healthcare cost trend.

Small Business Owner Perspective

Small business owner Michael Brey agreed with Daley, saying that the nonstop rising costs of health insurance is untenable, and that many provisions of the ACA will benefit his business. He claimed that 96% of businesses have fewer than 50 employees, and therefore will not be subject to the pay or play penalties. He noted also that his business will be able to participate in the future SHOP exchanges, which will allow small businesses to pool their health insurance buying power with other small businesses.

He noted also that the ACA will “rein in hidden costs,” such as the subsidization of the uninsured who receive medical care. Said Brey, the law “isn’t perfect,” but is the “first meaningful law in many years that will address rising costs.”

Other business owners, however, disagreed. Hugh Morrow, President of Ruby Falls, LLC, said that due to the definition of full-time and full-time equivalent employees, his business – which employees many part-time and seasonal workers – will meet the 50-employee threshold and therefore subject him to ACA’s shared responsibility requirements. According to Morrow, this will reduce his business’s ability to grow, and force him to reduce payroll.

Other business owners, including Jeffrey S. Kelly, CEO of Hamill Manufacturing Company, similarly testified that the ACA is “unpredictable and unaffordable,” and will force him to ask employees to contribute more to their healthcare costs. He said that administering the many ACA provisions is burdensome, and insurance companies “are pushing down as many costs as they think employers can absorb.”

A full list of hearing witnesses and links to their testimony can be found here.