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OPINION: Who's Hit Hardest by Obamacare

Opinions expressed by Entrepreneur contributors are their own.

Among the greatest opponents of the Patient Protection and Affordable Care Act is the National Retail Federation. So staunch has its opposition been that the trade association made a symbolic House of Representatives vote to postpone the start of the employer mandate a "key vote" in its scoring of lawmakers, The Hill reports. Moreover, the organization has frequently criticized the Act, known widely as Obamacare, telling Speaker of the House John Boehner and House minority leader Nancy Pelosi in a recent letter, "We have repeatedly voiced concern about the effect of the employer mandate penalties on retail and chain-restaurant jobs and growth."

To economists, the retailer group's vociferous opposition to the PPACA makes perfect sense. It's a matter of cost-benefit analysis. Most businesses don't gain from the new law, and no industry is more adversely affected than retailing.

One of the law's goals is increase the fraction of people covered by health insurance. As a result, the law has much more impact on businesses that do not already offer employee health insurance than those that do. Retailers are not very likely to offer employee health coverage. The Kaiser Family Foundation 2013 Employer Health Benefits Survey reveals that only 29 percent of them offered coverage in 2013, as compared to 57 percent of all businesses.

Moreover, a smaller fraction of employees at retailers are eligible for health-insurance plans than workers in other industries. The Kaiser Family Foundation's 2013 benefits survey indicates that only 56 percent of retail workers are eligible for the health-care benefits offered by their employers as compared to 77 percent of workers in all industries. As a result, only 37 percent of employees at retailers offering health insurance are enrolled in a plan, versus 62 percent of employees in all industries.

Because health insurance is costly, businesses not currently offering employee health insurance expect the Act to increase their benefits cost. That's one reason why a 2012 Mercer Consulting survey indicates that a higher percentage of businesses in retail and hospitality -- 46 percent of businesses -- expect their costs to go up by 3 percent or more due to PPACA requirements, than businesses in other industries.

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The PPACA mandates that individuals obtain health insurance or face a penalty. For businesses in industries where most employees opt for employer health-insurance coverage if it is offered, the individual mandate will have relatively little effect. However, in industries with high insurance opt-out rates, enrollment in insurance plans is expected to increase dramatically. Kaiser Family Foundation data reveals that the "take up" rate of insurance is currently lowest in the retail industry -- 67 percent versus 80 percent overall. As a result, retailers will likely face the biggest increase in enrollments when the individual mandate is phased in.

The PPACA requires that all businesses with 50 or more employees provide health insurance to workers employed at least 30 hours per week. That provision impacts a much higher fraction of retail businesses than companies in other industries. A Mercer consulting study showed that 46 percent of businesses in retail and hospitality will need to alter their health- care plans to adhere to the regulation. By contrast, only 16 percent of businesses in financial services would have to make these changes.

Retailers see the requirement that they offer health insurance to employees working at least 30 hours per week as the most costly provision of the PPACA. A 2013 International Foundation of Employee Benefit Plans survey indicates that 37.5 percent of retailers and wholesalers reported this to be the Act's most costly provision, as compared to only 20.4 percent in all other industries.

As a result, retailers and wholesalers say that they more likely to cut employee hours to remain under the health -insurance coverage cut off. The IFEBP data indicate that 35.5 percent of retailers and wholesalers plan to cut worker hours, as compared to only 10.1 percent of businesses in all other industries.

All of this makes it unsurprising that the National Retail Federation is leading the charge to water down and repeal the PPACA. The adverse effects of the new law are greatest for small businesses in the retail industry than practically any other industry.


Scott Shane

Written By

Scott Shane is the A. Malachi Mixon III professor of entrepreneurial studies at Case Western Reserve University. His books include Illusions of Entrepreneurship: The Costly Myths That Entrepreneurs, Investors, and Policy Makers Live by (Yale University Press, 2008) and Finding Fertile Ground: Identifying Extraordinary Opportunities for New Businesses (Pearson Prentice Hall, 2005).