This article, written by a member of IBA partner Job Creators Network, originally appeared in the Boston Globe.
Since President Barack Obama’s signature health care reform became law, American employers have endured a barrage of requirements, penalties and changes to the way they do business. From mandatory health care requirements to a complete redefinition of the full time workweek, businesses have been left to sift through it all and somehow make ends meet. It should come as no surprise that a recent U.S. Bank Small Business survey found healthcare is now the most significant national concern among small businesses, ranking even higher than the federal budget deficit and taxes.
Many presidents, including President Obama, have echoed the same inspirational words: If you work hard and follow your dreams, you will have the opportunity to succeed. This used to be the American Dream, but no more. Today those words are hollow political rhetoric meant to buck up the middle class so they can endure yet another round of setbacks.
As an entrepreneur, I know early stage businesses are especially fragile. The last thing a small business owner needs is to worry their operational costs will change and sink them before they’ve even gotten off the ground. Thirty years ago, a more predictable business environment led me to take a risk and pursue a new retail concept: selling more affordable office supplies directly to businesses and consumers. That small business became quite successful. Today, Staples has more than 90,000 employees.
Of course, not every small business succeeds. But unshackled entrepreneurs fuel America’s economic growth and create our opportunity society. Small businesses are also the most creative. According to the Small Business Administration, innovative smaller businesses produced 16 times more patents per employee than larger companies also creating intellectual property.
Instead of supporting this type of innovative growth, the president’s health care law stifles it. The employer mandate — requiring employers with 50-plus employees to comply with expensive requirements — was long planned, left unexplained, then delayed. Many companies endured chaos as Washington contorted. Small business owners, always hit harder with the cost of compliance, don’t know what will hit them next.
Now business leaders are discovering a new provision, hidden as a “fee” on health care insurers. This is a tax that will be passed straight onto small businesses and their employees. The small business community calls it the health insurance tax, or HIT, for good reason — this is essentially a tax on Main Street USA. The added cost doesn’t affect big businesses; they self-insure their employees. The HIT only hits the health-insurance marketplace, where most small businesses and the self-employed purchase their health care plans.
The HIT charged to health-insurance companies will be passed on to small business. In turn, those companies, with typically slim profit margins, will pass the HIT on to employees. Since small businesses employ two-thirds of all the US workforce, most Americans will pay the bill. Families will pay up to $500 more each year beginning in 2014. The tax will actually increase over time, causing a greater burden in the years to come.
At Job Creators Network, we are already hearing stories of the HIT’s impact on small businesses. According to the same US Bank Small Business survey, three out of five owners who run a business making $1 million or more annually say the law resulted in higher premiums for their business. Forty-five percent of business owners with at least five employees reported cutting back on new hires. Clearly, the HIT is a major factor.
The impact the HIT has on the US economy is equally disturbing. A recent National Federation of Independent Business survey showed up to 286,000 jobs could be lost by 2023 as a result of the HIT. Small businesses would shed 57 percent of those workers.
It is time Congress hears from the men and women on Main Street who are rebuilding our economy and creating jobs. The Stop the HIT Coalition, representing small businesses and employees, recently launched a new online tool —www.stopthehit.com/payment-inquiry — to help business owners and their employees calculate the cost of the new tax. The numbers are shocking, so the tool helps users share that surprise with their Congressmen.
This is just the beginning of a difficult year for policymakers, as they attempt to explain why small business owners have to pick up the check for healthcare reform. These entrepreneurs just want what they’ve been promised by their leaders: a fair chance to succeed, and a shot at the American Dream. It’s a promise Washington must keep by repealing the Health Insurance Tax.
Tom Stemberg, co-founder and former CEO of Staples, is managing partner of the Highland Consumer Fund.
