What Obamacare Decision Means for Texas Businesses

June 28, 2012

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Austin – In reaction to today’s Supreme Court decision, State Representative Phil King (R-Weatherford) has released the following remarks and information:

King remarked: “While legal and healthcare scholars are still struggling to decipher what today’s Supreme Court decision on Obamacare means, one thing is certain – the Court ruled to uphold the individual mandate portion of the Affordable Care Act, which will have a major impact on Texas businesses.”

Here are a few points on what this means for Texas businesses:

  • The Texas comptroller’s office estimates that from 2010 to 2019 Texas businesses will pay approximately $9.3 billion in penalties under the employer mandate.
  • The mandate requires employers to offer their employees a health insurance policy that meets the minimum essential health benefits established by the Secretary of Health and Human Services. If an employer does not offer such coverage, an annual maximum penalty of $2,000 for all employees after the first 30 employees is assessed.
  • Offering coverage, however, does not guarantee protection from the penalty. If the policy costs more than 8 percent of an employee’s household income, and if the employee obtains insurance through a state exchange, the employer must still pay the penalty. If one or more employees qualify for and receive a subsidy in the state insurance exchange, then the employer is assessed the lesser of $2,000 for all employees beyond the first 30, or $3,000 for each employee that receives subsidies in the exchange.
  • The law differentiates between those businesses with fewer than 50 employees and those with more than 50 employees. The biggest difference between these two business sizes is that the employer mandate applies to the latter but not the former. This distinction creates a significant disincentive for growth for small businesses as they approach the 50 employee mark and consider the compliance costs that come with hiring the 51st employee.
  • The Texas economy has been the most successful economy of all 50 states over the last decade. The state’s low tax and low regulatory structure are a key driver of this economic success, but the health care law threatens the state’s continued prosperity. The regulatory, tax, and administrative burdens posed by the health care law create a significant drag on business growth.
  • The rising cost of business driven by compliance, employee coverage, and penalties will force medium size business to either merge with one another to gain economies of scale, sell their business to larger competitors, or shut down completely. The future of Texas business under the health care law is one in which small businesses stay small, large businesses stay large, and growth is muted.

For a more detailed report on the costs of Obamacare on Texas businesses, you may visit Texas Public Policy Foundation’s full analysis by clicking here.