Small Business Owners Facing Tough Decisions In Wake Of Health Care Ruling

Like many small business owners, Rose Corona heard the news that the U.S. Supreme Court upheld most of the provisions of the Affordable Care Act on Thursday morning, then had to go open her shop, Big Horse Feed and Mercantile, a retail feed and old-fashioned general store in Temecula, Calif.

Now she faces her own tough decision. "I know I'm going to have to reduce the size of [my] labor force and amount of business I can do because of this," Corona said. "And it's not just me -- it's across the board. Practically, this means we will have to start cutting jobs."

Small business owners seemed fairly united in their surprise over the ruling -- many expected parts of the law to be struck down -- but divided in their opinions of whether it was good or bad news for small business.

Unlike Corona, Mike Roach, co-owner with wife Kim Osgood of Paloma Clothing, a women's clothing store in Portland Ore., said he was "thrilled" that the Affordable Care Act was upheld. One of the law's provisions is the small business health care tax credit, which allows businesses with fewer than 25 full-time employees that pay at least 50 percent of total premiums to qualify for a tax credit of up to 35 percent of their premium contributions. That credit increases to 50 percent in 2014.

"That means the over $7,000 in income tax credits I get will remain intact and continue to help us buy health insurance," Roach said. "I'm relieved that wasn't taken away."

The ruling also upholds the creation of required state-based exchanges to offer affordable coverage for individuals beginning in 2014. Roach sees these exchanges as a boon to small business.

"We can pool our purchasing power to get better rates from insurance companies than we get now. We're getting slaughtered every year the insurance costs go up, and the attitude has typically been, 'Too bad, you small businesses don't have negotiating power,'" he said. "The exchanges hold the promise that finally, they're leveling the playing field. ... We're trying to attract the same top-quality employees as Nordstrom or Talbots, which was difficult simply because we pay a much higher premium to get the same employee."

Many other small business owners are concerned that the law's mandate to purchase insurance for employees will result in higher costs, resulting in an increase unemployment.

Under the law, businesses with 50 full-time equivalent employees that do not provide health insurance coverage must pay a penalty of $2,000 per full-time employee in excess of 30 full-time employees.

"Those who employ 60 are going to lay off 11. Those who employ 49 will hire nobody," said Dan Galbraith, owner of Solutionist, a visual communication, sales and marketing firm in Greensburg, Pa. "One owner who has 70-plus employees has told me he will close his business and start another business without employees. He just doesn't have health care built into his business model."

Corona agreed that "the biggest expense for a small business owner is labor force and investment in people."

"A lot of small businesses are already tightening belts to stay alive," she said. "This is going to drive a lot of people out of business, and I know a lot of others who will cut out health care altogether, pay the fine and leave people to the government to insure."

And even with the legal decision made, the political debate over health care reform is far from over. Corona said she needs time "to digest it all," but felt just as unsettled after the decision as she did before.

"I believe small business is going to keep fighting to get this repealed through Congress," she said. "I'm not saying there shouldn't be affordable health care for everybody, but if you bite off more than you can chew, you will choke yourself. With this legislation, small business is just seeing costs going up and we're finding it difficult to swallow."

For his part, Roach hopes the continued debate over health care reform will spotlight some of the challenges that continue to plague small businesses.

"Small businesses are struggling and have been completely overlooked, and this is the first piece of legislation that has singled out mom-and-pop businesses with 10 or fewer employees to receive the maximum benefit," he said. "I hope that can be brought to light and made more clear to the American public in the next year or two."