How will Obamacare Affect Small Business?

Since the economy began recovering from the economic crisis of 2008 and 2009, Washington has used one key talking point.

According to politicians, the key to a sustained economic recovery in America is the strength and health of the small business community.

Small businesses create more jobs than large corporations and according to some economists, have led the way in recoveries during past recessions.

But much of the small business community feels like Washington’s commitment to their growth may have been nothing more than talk in light of the recent Supreme Court decision that upheld the Patient Protection and Affordable Care Act, better known as Obamacare.

Some of the key provisions of this law include:

  • Most Americans must have at least minimal health care coverage or pay a penalty that the Supreme Court said, could be characterized as a tax.
  • Insurers have to provide coverage to Americans with pre-existing conditions.
  • Businesses with more than 50 full time employees have to provide health care coverage for their workforce.

According to some small business leaders, this law adds to what they’ve experienced since the economic recovery began: uncertainty.

The big question on the mind of the the small business owner is – How will Obamacare affect small business?

affect of Obamacare on small business

Will Obamacare help or hinder small businesses?

Small business, operating on slimmer margins that make them unable to absorb added regulatory costs, find it difficult to forecast revenue when laws are enacted that could affect their bottom line.  Some business owners believe that adding healthy Americans to the health care pool will help to bring down the cost of coverage but others believe that costs will rise when those with pre-existing conditions are added.

Others believe that the law will add other costs that will eventually be passed down to taxpayers.  Regardless of the eventual outcome, when business owners can’t accurately forecast future costs, they don’t hire or expand.

Hiring Freeze

Others argue that the mandate requiring coverage for all employees once a business reaches 50 employees may not work as intended.

In order to prevent falling under that provision, some business owners will keep their employee base below 50 people and even worse, some may lay off full time employees in favor of independent contractors.  This, according to business owners, may encourage less growth and even result in contraction.

Not everybody agrees.

The Small Business Majority, a non profit organization helping to solve problems facing the small business community, believes that the law is a positive for small business owners.  They say that the law will make healthcare accessible and affordable for entrepreneurs around the country.

The Fight Not Over

The Supreme Court may have upheld most of the law but Republicans have vowed to overturn the law and much of the small business community is signing on to the effort.  This will largely depend on the results of the upcoming presidential election taking place in November.

Until then, small business owners have to prepare for the future effects of the new law that is sure to be a talking point not only during this election year, but for the near future as more becomes clear about the costs and effects of Obamacare.


Right now healthcare is too expensive.  The thought of having to get healthcare on my own is pretty scary.  People all over feel tied to their jobs for fear of being without healthcare.  Many get jobs they don’t want just because it has coverage.

That’s not good for people and not good for the economy.  We need to be free to start up small businesses, follow our passions, and innovate like a small business can.

I’m all for finding ways to make healthcare less expensive.  There’s a part of me that hopes healthcare will be easier to get and less expensive as well.  As a small business owner with a family healthcare is critical.

Related: Find Affordable Healthcare With eHealthInsurance – Review

But I fear that there will be a lot of unintended consequences with this Act in place.

I think we’re slowly heading into the age of the independent contractor.  As more people can work from virtually anywhere I think you will see more companies hiring independent contractors.  This will be even more likely if they have to watch the number of employees they have else they have to purchase health coverage for them.

That’s not good for the economy either.

I know this, it will be an interesting next few years as the details are hammered out on how Obamacare will be enacted and as the Act continues to grow into full effectiveness (some parts have already taken affect).

Do you run a small business?  What do you think of Obamacare?

Obamacare Upheld, Small Business Community Divided | Fox Small Business Center
Supreme Court’s Obamacare Ruling Has Small Businesses Divided : The World :: American Express OPEN Forum
Small Business on Obamacare: No Reason to Hire or Invest – US Business News – CNBC

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Published or updated March 29, 2013.


  1. Obamacare is a disaster for small business and an assault on personal freedom. I believe Obamacare was designed to fail. The “tax” for employers who do not provide health insurance is so small is will force employers to consider dropping coverage and paying the “tax”. This will force employees to the government exchanges and make the employer look like the evil greedy money grabber. This accomplished two goals of Obamacare: Move us toward single-payer healthcare and demonize free markets. Obamacare must be repealed and replaced with free market reforms that increases competition and unleash innovation.

    • Well We have a small business only four employees hoping to expand but I did a price check on Health insurance for us and with a $5000 deductable it is $400 a month, now that may be a piece of cake to Obama but for my business and the employees this is a chunk out of our pay. My daughter got hurt and we took her to the ER now with all the cost of the ER, CAT scan, Doctors etc I still came out better than paying four hundred a month forever. Now for someone who has a bad condition paying that may seem a great idea but this is the first time iin the ER and she is in her teens. So making us get Insurance when we don’t want it is just something I believe Obama came up with to Control us like the gun control issue, it is all about control

      • Glen Craig says:

        Thanks for adding your experience Pat.

        My understanding is by having everyone get insurance it helps to bring down the rates overall. We’re still early in this healthcare issue. I can see how it will negatively impact many small businesses so far. I hope we can look back at this some years from now and look at these laws positively but I don’t know if that will be the case.

  2. My employer has already stated that they will likely drop insurance coverage and pay the penalty/tax for not providing insurance. Their rationale is that we’ll still have coverage under the government plans, and at the same time the business is struggling and not having to provide insurance (especially for our unhealthy group) will mean a better bottom line. It just makes sense for them. It stinks for us because it essentially means we won’t be able to keep our same health plan and coverage as Obama said we would (while full well knowing that this would be the result for many companies, moving us towards single payer health care).

    • Wow, you have o wonder how many other companies will go this route? You’re right, it makes sense to take the penalty hit if it’s less than the actual insurance.

      In a better market a company will offer health insurance to keep the best employees but in this tough economy people will be happy to have jobs, even without the coverage.

  3. What I think of Obamacare? Sucks! See my post tomorrow of it’s ramifications.

  4. There is NO doubt that if a small business has 48 employees they are going to be VERY unlikely to hire those last 2. Notwithstanding my real problem with Obamacare speaks to your point directly…this isn’t going to control costs! The insurance company isn’t going to just take this one on the chin and say, “well we have to include unhealthy people lets keep rates the same.” To think otherwise is lunacy.

  5. How much does it cost to cover each employee? To me a 50 strong company is not a small business but I guess I have a different notion of small business and am not sure what the official boundary is!

    The biggest issue I see is probably in reverse to everyone else. With such huge profits the insurance companies can afford to bring down the cost of insurance and still turn a profit. Sure, insuring the sick could potentially cost them more but this is a chance to push them to get involved in preventative medicine as it will also benefit them too.

    I want profit out of health because health will always make less money than sickness so surely when profit is involved the country will just get sicker! Healthcare for all is not a liberty being taken away, it’s something less to worry about and hopefully will help the country flourish.

    Of course small business (50+) may see an issue in covering and I understand the worry but surely the long term benefits of everyone being covered is a good thing?

    A member of my family runs a car business in Vermont and he already supplies health insurance for his 20 or so employees. He has the troubles of every small business owner but is being very positive about the whole thing and is happy knowing that his fellow Americans can all be covered.

    • I think how big the business is gets determined by its revenues. You can have businesses that only need a handful of people that make a great deal of money.

      Indeed we tend to look at health as after-the-fact rather than preventive. There’s certainly more profit for drug companies that way, no? (not saying I agree with it).

      • I just think it’s at the benefit of everyone for each and every one of us to be healthy. As an employer having healthy workers will likely save you money in the long term I would think. I think universal care where we all foot the bill (well those of us who can afford) is probably the best bet. The people who don’t want to work and don’t want to be healthy are a tiny tiny proportion.

        Any change will have good and bad effects and this who Obamacare thing is a shake up that will have good and bad elements but at least will bring the USA once step closer to being a real developed country!

        The good is already spreading and of course Vermont, a State close to my heart, is leading the charge:

        I know people won’t all agree with me but if America starts uniting to the one cause of getting everyone healthy maybe it could have the best universal healthcare system in the world! It also has years of mistakes made my other countries to learn from so can build a better system from the ground up.

        • I completely agree — the access to good healthcare is the right of every citizen, not the privilege of a few. I believe that, ultimately, this will invigorate the economy because people will no longer be afraid to leave unfulfilling jobs for risk of losing health benefits — creativity and innovation will soar. We need to end the fear mongering — NOW.

          • Glen Craig says:

            It will be interesting to see how this affects the economy long-term. I certainly know of people who have stayed at their job just because of health care benefits.

    • I have a unique view on the subject. I inherited a small business with 40 -45 employees in the childcare profession that is ready to grow but fear what 2013 holds with Obamacare and the possibility of losing the Bush tax credits are keeping us from doing so. I am also a RN working weekly in our hospitals in AZ. As a business owner we have seen our licensing fees jump from $300 to $8000 overnight per school as well as a decrease in what the Department of Economic Security (DES) pays for the families who qualify for assistance for our services by almost by half in 2 years. With the Federal and State regulations and the drastic effects on our pocket book we are lucky to still make $30K a year with all 3 schools combined.
      Now we face being mandated to supply health insurance for our 40+ employees and that $30K a year may be $0 when you add the insurance premiums as well as the administrative hours we pay out to oversee this federally mandated insurance program.
      On the nursing side of things; I take care of all ages and from my experience the “new” generation is one of entitlement. I can have 3, 80+ yr old patients that are very ill and one 26 yr old pt that is stable and I will 8 times out of 10 work harder for the 26 yr old than all 3 of the 80+ yr olds together. The respect that the 80 yr olds have for what the doctors, nurses, dieticians, aids, and techs are doing allows us to still meet their needs but in a way that is not overly time consuming and a waste of resources. Now the “healthy” 26 yr old will fight the doctor ordered diet, complain about it to the RN then we involve upper management and at the end of the day we have many highly educated and paid people spending hours discussing why this patient cannot have cheese on his hamburger. The REDICULOUS lengths people will go to, to get what they want is amazing. It is a slap in the face for what the patient came in for – to get medical help- then they fight us every step of the way.
      I am 29 and I started babysitting when I was 11 and have never stopped working since. I feel that if I want or need something I SHOULD work to get it. I have never used any government assistance from grants to food stamps and don’t plan on doing so. My parents did not pay for my college or rent I worked for my every need. Americans have become so consumed on what they can get for nothing that it is expected that someone provide for them if they cannot for themselves. It is this mindset that got us in the debt we are in today and unless we change the US is going to see drastic changes in our economy.
      Sorry so long! But providing health care for those who don’t already have it now is not a new freedom or path to a better America it is one more step toward a bankrupt country that will someday face its loan shark! I hope I’m not around when that day comes.

  6. At this point we have over forty employees, we have a very overhead intessive business model with very thin margins, at this point the penalty alone would take out over thirty % of my net profits – the coverage which im sure would be more than the seven fifty penalty – would wipe us out – so im not sure how this can be justified and if true this would have a negative effect on the economy except i guess if your an insurance or drug company – Repeal it –

  7. More and more business are using independant contractors every day now (even government agencies) so they don’t have to offer health insurance, even before Obamacare..I love how people make up things as they go along, blame Obamacare for something that is already happening its kind of funny. I lived in MA under Romneycare and to me that was the same idea I had to pay top dollar for state insurance or get a fine that I couldn’t afford either..hence no doctor visits for me…but because its a democratic plan the Republicans must be against it!!! wow that is progress can’t we all work together and stop lieing and making up stuff as we go along? small business are getting by hiring illegals and big corps are taking their jobs out of the state ..lets make them stop so we can all afford health insurance due to decent paying jobs.

  8. I have a small business with 59 employees. If only 20 are full time, do I still have to supply health insurance for them? . . . for all ? What constitutes full time in hours/week?

    • Doing a little research it looks like you take the total monthly part-time hours and divide by 120. This give you the number of employees that are considered full-time and count towards your 50.

      I don’t see anything saying that you would be required to give coverage to part-time workers, just that part-time hours would count towards your full-time total.

  9. My employer just notified us today that everyone working 40 hours will be cut down to 29 hours a week so they don’t have to pay the penalty. Is this legal for them to do? And can I file unemployemtn?

  10. @ Confused

    Yes, it is legal for an employer to reduce full time workers to avoid the penalty. Also most states have individual requirements for unemployment- but usually you do not qualify for benefits if you willingly leave the position or were fired.

What Do You Think?