How Obamacare is killing small business growth

The first business I started was in 1989. It was a small, boot-strap funded engineering services firm. My partners and I had very little capital but big plans to strike out on our own and see if we had what it took to be successful business owners and live the entrepreneurial dream. Like many (most?) underfunded start-ups we often went without paychecks for weeks or months at a time in order to pay our employees, pay rent, buy equipment, pay vendors, pay lawyers, accountants, etc., and put the company's meager initial proceeds back in the business keep the doors open and make a go of it. One thing we consistently provided even from the start was health insurance for our employees. I still remember that our cost for a good, low-deductible plan with Blue Cross / Blue Shield (BC/BS) was $90 / month for individuals and $139 / month for a family plan. My partners and I might not have been getting paid at times but we were determined to provide health insurance for our employees and their families even without the government "making" us do it. I sold my interests in that venture to my partner years ago but it's still a viable, going concern and still provides health plans to it's employees.

Fast forward to 2010. When I decided to branch out with my latest entrepreneurial venture a similar family health plan from BC/BS cost ~$600 / month for a family plan. Not cheap certainly (compared to the $139 / month from 1989). The American Institute for Economic Research says that $100 in 1989 is the equivalent to $175.81 in 2010 so the ~75% cost-of-living increase from 1989 would make health insurance cost about $244 in 2010 dollars (see AIER COLA Calculator). Given that it took $600 to buy health insurance in 2010 (a 330% increase versus a 75% increase on overall cost-of-living) certainly did not bode well for start-ups but at least it was manageable all things considered.

Fast forward again to 2016...and Obamacare. A comparable family plan from BC /BS now costs $2,200 / month; or more than $26,400 / year (versus $7,200 / year in 2010...prior to Obamacare). So for every employee I hire (or wish I could hire) we incur a cost of $26,400. Four new employees? That's over $100,000 a year. That's before salaries, other benefits, and the costs of all the other things an employee would need to do their job. So if a small business wants to hire 10 employees they better have a quarter million dollars laying around just to cover health insurance...before you actually pay someone a salary

The outlook for 2017 is even worse. Like most States, our home State has only 2-3 health insurance providers and one of them (BC/ BS) has 80%+ market share. United Health has decided to pull out of the Obamacare exchanges and pull out of our State entirely leaving BC /BS as practically the sole provider in the State for 2017. Current estimates are than health insurance costs will increase ~32% for 2017; making the $2,200 plan come in at a whopping $2,900 ... per month ...per employee. At $34,800 annually per employee just for health insurance our hiring plan for 2017 is exactly 0 employees; all because of Obamacare.

What will do to grow? We'll rely more heavily on our vendors and contractors. We'll engage our CM's to provide more turn-key product testing and assembly services. We'll further outsource some of our development to independent contractors and possibly even off-shore vendors. We'll work with our distributors to provide more value-added services (pre-programmed ICs, bonded inventories, drop-shipping, etc.). One thing we won't be able to do is hire people; and thus develop more in-house talent, or further our employee development, or mentoring, or succession planning, or many of the other things a small company (or any company) should be doing to grow responsibly and sustainably. We'll be too busy paying for health insurance...assuming we can even still buy it at any price.