How are businesses responding to the ACA?

THE impact of the ACA on the nation’s weak economic recovery continues to draw analysis and discussion.  One argument opponents of the ACA often make is that it is driving workers to cut hours and shift workers to part-time status.  To bolster this argument they often cite elevated levels in part-time employment.  While total part-time employment remains elevated, involuntary part-time work (the part-time work that would be caused by the ACA) has been falling during the recovery–though it remains well above pre-recession levels.  In short, the ACA is not having the enormous negative impacts on the labor market as some suggest(ed).

Parallel to the part-time employment data, the New York Fed today released the results of two surveys that examine the impact the ACA is having on businesses.  The surveys, the Empire State Manufacturing Survey and the Business Leaders Survey, asked businesses in the manufacturing and services sectors, respectively, a series of questions regarding the impact the ACA was having on health car costs, and how businesses were responding.

Among the respondents, 73.3% of manufacturing firms said the ACA raised health care costs this year, with 81.4% reporting that costs will increase next year.  For the services sector, those numbers were 58.4% and 73%.  According to the NYF, the median firm expects costs to increase approximately 10% in both 2014 and 2015.  In response, 65% of manufacturing firms and 54% of services firms said they were making changes to their health plans.

For those making changes, the most popular changes were the following. 40.4% of manufacturing firms said they were reducing the range of services, with 33.8% of services firms also reducing the range of services and another 33.8% reducing the size of the network.  Meanwhile, 84.6% of manufacturing firms reported they would increase deductibles and out-of-pocket maximums, with 79.4% of service sector firms reporting they would increase co-pays.  Other responses included increasing premiums and employee contributions.

As to workforce reduction, only 21.6% of manufacturing firms and 16.9% of service sector firms reported they would cut their workforce in response to the ACA.  Price increases were the most likely result of the ACA for both sectors, with 36.4% and 25% of manufacturing and service sector, respectively, reporting they would pass costs onto consumers.  As for part-time work, 19.3% of manufacturing firms reported they will increase the proportion of part-time work, with 20.2% of service firms reporting they will do the same.  Other responses included outsourcing work and reducing other employee compensation.

Regarding the changes to the workforce, it is important to note that the survey did not ask firms whether they were changing the composition of their workforce.  Instead, the survey simply asks “How, if at all, are you changing (or have you changed) any of the following because of the effects that the ACA is having on your business?”   As a result, it’s difficult to thresh out whether the percentages in the preceding paragraph represent all respondents, or just those respondents who reported making changes to their workforce.  For contrast, the same survey conducted last year found that 65%of firms were making no/minimal changes to their workforce as a result of the ACA, with 6.5% of all firms reporting they would increase part-time employment.

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John Haskell

About John Haskell

John graduated from the University of Southern Maine with a degree in Political Science, and from the University of Maine School of Law. He has worked in both the public and private sectors, and currently, works with a small business services company in the Mid-Coast area.