When President Barack Obama signed into law the Patient Protection and Affordable Care Act, the intention was to deliver universal health care to all Americans. But, like all major societal and governmental overhauls, there are some who are worried about the burden of health care reform compliance.
Based on Internal Revenue Service figures, the House Committee on Ways and Means revealed this month what may be an unintended consequence to the act. There will be nearly 80 million hours worth of compliance paperwork to complete, most of which would fall to small businesses. Other reports from the Education and Workforce Committee as well as the Commerce Committee put out even higher estimations. They indicate the total cost of compliance could be 127.6 million hours. This is so much time that some essentially call compliance alone a new tax.
To put that number in perspective, the House Ways and Means Committee says in the time it takes to comply with the new rules:
- The Empire State Building could be built 18 times
- Space vehicles could travel from Earth to Mars 13,048 times
- Halley’s Comet, seen from earth every 76 years, could be spotted 119 times.
In other words, some businesses and governmental agencies are likely to give up more productive activities in order to comply with the regulations. In fact, panel head Rep. David Camp, has said it’s no wonder that 70 percent of small businesses cited in a recent survey noted compliance as a major obstacle to creating jobs.
In reaching compliance, companies must supply health insurance to their employees or face tax penalties. Many companies say that forced purchases of insurance will strip away profits, reduce the ability to offer competitive wages, and decrease their workforce size or inhibit research and development or other essential methods of growth. Furthermore, since reaching the health care reform compliance is mandated, they might not be able to offer competitive insurance coverage. This, in turn, could also deter prospective employees. There is always the option of not complying and paying the tiered tax penalty, but this could be a dangerous game to play when dealing with taxes owed to the federal government.
Some companies are more confident about the impact of meeting health coverage compliance requirements. The compliance mandates that employers who foot the bill for at least 50 percent of their employees are allowed to write off as much as 35 percent of their contributions. By 2014, that write off will surge to 50 percent, meaning that some companies can now attract competitive employees and save some money to reinvest back into the company.
Essentially, the pros and cons of the health care reform compliance issue seem to rest with the ideological belief of each company head, though there is no doubt that compliance is a challenge facing all business owners in the near future. According to ADP, 7 out of 10 business decision makers agree that the cost of providing health insurance to employees is a “barrier” to reaching business goals.