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Will Obamacare Cost You Your Job?

By Keith Speights - Apr 10, 2013 at 11:20AM

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The Federal Reserve says that the Patient Protection and Affordable Care Act is already costing jobs. Could yours be one of them?

Is your job in jeopardy because of Obamacare? Staunch advocates of the Patient Protection and Affordable Care Act would say absolutely not. Diehard opponents would maintain that many jobs are at risk because of Obamacare. What's the correct answer? It's a definite "maybe." Your job could be in jeopardy if your employer fits into one of these three categories.

1. Medical device companies
Several medical device companies have already slashed jobs or are planning to do so because of Obamacare. Abbott Labs (ABT -0.33%) began shedding the first of 1,900 jobs a few years ago. The company attributed the cuts partially to new fees and pricing pressures resulting from the Affordable Care Act.

Stryker (SYK -0.57%) executives placed blame squarely on the 2.3% medical device tax included in Obamacare as the reason for eliminating 5% of its workforce -- 1,170 jobs. Most of Stryker's cuts were implemented by the end of 2012 before the new taxes went into effect.

However, other medical device makers still have possible staff reductions looming on the horizon. Medtronic (MDT 0.03%) sent 500 employees home last summer and plans to cut another 500 jobs by the end of this year. Privately held Welch Allyn expects to eliminate 10% of its jobs over the next three years. 

If you work in the medical device sector, there is some hope, though, that further jobs won't be lost. Momentum appears to be building on both sides of the aisle in Washington to either repeal or modify this particular component of Obamacare. 

2. Small businesses
Obamacare requires that employers with more than 50 full-time workers provide health care coverage for employees beginning in 2014. For some small businesses, the extra costs for this coverage are forcing tough decisions. One alternative is to pay a $2,000-per-employee penalty for each worker over a 30-employee level. Some businesses will choose to pay the penalties because it's cheaper than providing insurance.

However, other small employers could cut jobs altogether to move below the 50-employee threshold established by Obamacare. For example, a small business with 54 full-time workers could decide that eliminating five jobs makes more economic sense than paying significantly more for health coverage or penalties. Another alternative that businesses could take is to keep employees but reduce their hours to less than 30 per week so that the workers won't be counted as full-time.

How significant are these risks of job losses from small businesses? Experts disagree, but the small businesses that appear to be most likely to face hard choices -- those with 20 to 99 employees -- account for more than 19 million jobs. A recent study from life insurance research organization LIMRA found that less than half of small business with fewer than 100 employees offer benefits to their employees currently. 

3. Organizations that can easily outsource jobs
There's one way that companies can avoid the additional health care costs from Obamacare but still keep the same number of workers: outsource the jobs. Temporary-employment agency Robert Half (RHI -0.08%) said in January that the company was receiving inquiries from employers with around 50 employees. These agencies don't have to provide health coverage unless the temporary worker is employed on a full-time basis for at least 12 months.

Another avenue for employers -- large or small -- to minimize added costs from Obamacare is to ship the jobs abroad. The health reform legislation doesn't require companies to provide health coverage for employees outside the U.S. Boston Scientific (BSX -0.41%) is one employer that, in addition to cutting jobs because of the new medical device tax, is also moving some operations to China.

Mixed bag
Despite studies from organizations such as the Urban Institute projecting that Obamacare wouldn't cost jobs, the reality appears to be otherwise. The Federal Reserve's Beige Book noted recently that "employers in several Districts cited the unknown effects of the Affordable Care Act as reasons for planned layoffs and reluctance to hire more staff." Even an economist lauded in the past by the White House, Moody's Mark Zandi, says that the sluggishness in employment stems largely from small businesses not hiring because of the Patient Protection and Affordable Care Act.

However, Obamacare should create at least some jobs. The higher numbers of insured Americans will automatically increase demand for health care services, which will result in the need for more jobs for health care professionals, according to some pundits. Then there's the new requirement announced last week by the Department of Health and Human Services that could create thousands of jobs. All state-based health exchanges must hire "navigators" to assist individuals seeking insurance. What exactly will these "navigators" do? Explain Obamacare to people.

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Stocks Mentioned

Abbott Laboratories Stock Quote
Abbott Laboratories
ABT
$109.09 (-0.33%) $0.36
Stryker Corporation Stock Quote
Stryker Corporation
SYK
$203.26 (-0.57%) $-1.17
Boston Scientific Corporation Stock Quote
Boston Scientific Corporation
BSX
$37.87 (-0.41%) $0.15
Medtronic plc Stock Quote
Medtronic plc
MDT
$90.25 (0.03%) $0.03
Robert Half International Inc. Stock Quote
Robert Half International Inc.
RHI
$77.84 (-0.08%) $0.06

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