The Economic Impact of Obamacare

When the media caught wind of the CBO's report findings, headlines spawned declaring Obamacare to be a job killer. But what is actually in the report?



How the ACA will Affect Jobs, Employers

The Congressional Budget Office (CBO) Report

On February 4, 2014, the Congressional Budget Office, a non-partisan agency that conducts impartial analysis of Congressional budgetary issues, released their annual report of the economic outlook from 2014-2024. Since the CBO releases reports regularly, it seems odd that this report would generate so much media attention. But the report estimated the future impact of the ACA on the economy and jobs, revising earlier projections. When the media caught wind of the report's findings, headlines spawned declaring Obamacare to be a job killer that also will turn the workforce into predominantly part-time.

The problem with the headlines, was that the report said no such thing. The CBO report does predict unwanted side effects of the ACA, but it does not say that Obamacare will cut 2.5 million jobs. Employers should be aware of what actually is in the report, however.

What the CBO Means for the Workforce

The CBO report states that by 2024, there will be up to a 2% reduction in hours worked due to the ACA, representing a decline in the number of full-time-equivalent workers by 2.5 million in 2024. However, "the estimated reduction stems almost entirely from a net decline in the amount of labor that workers choose to supply, rather than from a net drop in businesses' demand for labor," says the report. This is an important distinction because this does not mean that unemployment or underemployment will increase because of the labor reduction. "It's not about jobs, it's about workers - and the choices they make." It paints a picture of a workforce with more options to work the desired amount of time it takes to earn the income they require, since they will not be tied to full-time positions solely to have access to health insurance.

So what does this mean to employers? Some small business lobbyists believe that because the ACA requires qualified employers to offer insurance to employees who work more than 30 hours a week, they will be incentivized to cut hours of most of their workforce to below the 30 hour/week threshold, in order to cut costs. But the CBO doesn't believe the ACA will have that effect, stating that “there is no compelling evidence that part-time employment has increased as a result of the ACA.” Also, ISIhr believes that the cost of turnover involved with a mostly part-time workforce (and the CBO estimates turnover may increase because now getting insurance isn't dependent on employment), is far higher than maintaining a full-time workforce, even when required to pay for health insurance for those workers. Reducing turnover is the best way to grow your business and increase productivity. The savings are difficult to calculate, but very significant. Creating a culture that encourages employee loyalty and attracts skilled and productive employees will save much more money in the long run than cutting hours to avoid paying insurance premiums.

Another ACA Delay for Employers

In addition to the change in the economic climate, employers should be aware of another recent announcement concerning Obamacare. The Treasury Department announced last week that there will be another delay for the "Employer Mandate" or Shared Responsibility provisions of the Affordable Care Act. The requirement for employers with 50-99 employees to provide health insurance to their full-time workforce has now been delayed an additional year, until January 1, 2016. This affects larger employers (those with 100+ employees) as well. Though they will have to comply with the Employer Mandate beginning in 2015, they will only have to provide health insurance coverage to 70% (reduced from 95%) of their full-time employees before facing a penalty. This is to ensure a gradual phase-in of the provision; in 2016, the provision will be fully in effect for all employers with 50+ FTEs as it was originally indented to be in 2014.

Unsure of How to Handle the ACA?

As always, ISIhr is here to answer any healthcare reform questions. Our certified experts can assess your business and help you to make the best decisions for your organization and employees.

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