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New Health Care Law Discourages Growth Among Small Businesses

[ 0 ] Mar. 14, 2011 | SBO Editor

The health care law discourages economic growth among small and mid-sized businesses and disincentives higher wages, new hiring and robust employment benefits according to testimony recently delivered to Congress by International Franchise Association member Gail Johnson, president and CEO of Rainbow Station, Inc.

Johnson shared her experience as an employer purchasing insurance coverage for teachers and staff now under the Patient Protection & Affordable Care Act (PPACA) during a hearing in the House Committee on Education & Workforce on “The Impact of the Health Care Law on the Economy, Employers, and the Workforce.”

According to her testimony, the law is biased toward mandating coverage rather than providing meaningful cost control. “Over the next three years, it will force employers to decide between absorbing rising premiums versus paying tax penalties, ultimately slowing or stalling the growth of small and mid-sized businesses as we struggle with costly new requirements,” said Johnson.

Highlights from the testimony:

“Rainbow Station is already beginning to feel the impact of the new law. Since 1992, we have provided health insurance for faculty and staff and I have worked diligently to minimize out of pocket healthcare expenses for our employees. I make a concerted effort each year to keep co-pays low and ensure no deductibles for my staff. I want my employees to access the health care system with minimal financial barriers.

“Last month, everything changed. This year we will insure 84 lives at a cost of approximately $502,000.  If I changed nothing and renewed our policy from 2010, our policy premium would increase 18 percent.  This increase would drive the premium to nearly $593,000.  Due to the economic climate of the past two years, I could not afford to absorb this increase to our bottom line.

“For similarly sized workforces, our broker informed us that the baseline increase—or “trend”—is 12 percent per year.  This increase encompasses rising insurance, technology, medical, pharmaceutical and legal costs across the entire health care industry. Depending on plan design, our broker informed us an additional 3 to 5 percent increase could be expected due to the new mandates and administrative costs caused by PPACA effective this year. I had hoped that the law enacted last year would address these escalating costs, sadly it did not.”

About the International Franchise Association
The International Franchise Association is the world’s oldest and largest organization representing franchising worldwide. Celebrating 50 years of excellence, education and advocacy, IFA protects, enhances and promotes franchising through government relations, public relations and educational programs. Through its awareness campaign highlighting the theme, Franchising: Building Local Businesses, One Opportunity at a Time, IFA promotes the nearly 18 million jobs and $2.1 trillion of economic activity generated by franchising. IFA members include franchise companies in over 90 different business format categories, individual franchisees and companies that support the industry in marketing, law and business development.

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Category: Features