Dean Barber

What Does Obamacare Mean for Business?

In Uncategorized on July 1, 2012 at 6:39 am

Now that the Supreme Court has spoken, businesses of all size are going to have to figure out just how to comply with a very complex and not well understood Patient Protection and Affordable Health Care Act.

While some see the specter of higher costs, others are excited at the prospect of a wider insured pool that spurs increased demand for healthcare services and even a lowering of costs. Critics contend that consumers will spend less on other goods and services in reaction to new costs, while proponents argue they’ll spend more as their out-of-pocket medical costs fall.

Job growth may be curbed by new costs, or helped as a higher proportion of the population flows into a modernized and more efficient health-care system. The fact of the matter is that we just don’t know yet. Taking partisan politics out of it for just a moment, if that is possible, the reality is one of uncertainty. At least for now.

We do know that by January 2014, employers will have to come up a plan that meets the requirements of Washington or opt out and pay a penalty. Most large companies have been pushing more costs onto their employees and cajoling higher-risk ones into wellness programs to keep costs down. For them, the debate around health care has offered cover to make these shifts by drawing attention to soaring health costs and the burden that employers bear.

Companies with 50 workers or more will be required to offer insurance to their workers or pay a penalty. Faced with the prospect of higher costs to comply with the law, they just might choose to stop offering coverage altogether if they decide the penalties are cheaper than the administrative costs of running a broader plan.

We do know that insurance companies will have to sell coverage to everyone, regardless of their medical history, and will have to restrict how much they vary premiums based on age.

Nobody has a handle on the kind of coverage you’ll get for your money on a health insurance exchange. Workers may pay more than if premiums are negotiated as part of group coverage. Or they may pay less as insurers compete for business. Employees could be happy to get a bigger paycheck or resentful at being forced to foot the bill for their own coverage.

All-knowing, sage-like consultants like me who work on a contract or freelance basis may no longer feel the lingering insecurity of being uncovered in the event of an illness or accident. (Notice I said “may,” because I really don’t know either.) Right now, I can run five miles, which is pretty good for an old coot, but I cannot buy health insurance because of a pre-existing condition. I don’t like that.

Last week, I had the pleasure of visiting the brass of the Cox School of Business at SMU here in Dallas. I knew Al Niemi, the dean of the business school, as our paths had crossed many years ago when I was the business editor of the Birmingham News and he was dean, ever so briefly, at the University of Alabama at Birmingham. He had the fortune to escape UAB for a much better job at SMU, and I found myself in Dallas years later as a business consultant.

It was clear that my business school hosts were convinced that the landmark healthcare law would  make the lives of business people harder as an additional tax, which was what the Supreme Court called it. One of the professors went so far as to opine that the president was beyond a socialist but a purposeful and deliberate “wealth destroyer.” I listened with dutiful respect, because the food was good and my hosts were nice. Sometimes nodding is the best policy.

I happen to believe that the 2,700-page healthcare law is insanely complex and poorly understood. Tax credits contained in the law could help millions of small businesses obtain healthcare coverage for their workers, if they don’t already offer it, or lower the cost of coverage if they do. Yet a recent Wall Street Journal/Vistage International poll shows that 66 percent of small-business CEOs don’t know about the credits, and another 24 percent think their business doesn’t qualify.

Excessive regulation has become the biggest concern of business owners, which probably is a primary reason why most view the expansive and perplexing new healthcare law with a jaundiced eye and as just another layer to the cake of local, state and federal regulations that choke their businesses. And who can blame them?

So what does Obamacare really mean? How will this all play out? Will this be good or bad for business? There are plenty of theories out there floating about, but the fact is, we really don’t know yet. We will eventually to be sure. But not yet.

I’m not always so mamby pamby. In the last few weeks, I have been invited to speak to gatherings of economic developers in Oklahoma, Georgia and Florida. It’s something that I enjoy doing, because I like meeting economic developers and learning about their efforts in their respective communities.

In business, relationships matter because most people are instinctively social animals. But lately, I have been feeling like the lone wolf in the wilderness.

Barber the Contrarian

In these conferences of late, I have sat on panel discussions with other site selection consultants who provided very good counsel on what they are looking for in terms of information and how to best communicate with them (I prefer English).

I have been in total agreement with my colleagues on the nuts and bolts advice they have given on the best practices for maintaining and strengthening relationships between economic developers and site selection consultants.

While on a panel discussion this past week at the annual meeting of the Florida Economic Development Conference in Tampa, I think I may have praised the inventor of the pdf and suggested that buying me a beer was always appreciated. So much for my in-depth analysis on what site selection consultants want from economic developers.

But when it came to speaking about future economic conditions and resulting project activity, I was not so reticent, but did feel a bit guilty for calling it like I see it.

And I was speaking from experience of late — postponed or cancelled projects and interviews with CEOs and CFOs who tell me that they have no immediate expansion plans because of the uncertainties faced.

And then I look at the data, the raw numbers which plainly show anemic growth at less than 2 percent for the last four quarters, recalcitrant unemployment remaining above 8 percent, with falling consumer demand (and confidence) with a backdrop of stagnant wage growth and a possible unraveling of Europe.

In the latest quarterly report from the Business Roundtable, 75 percent of CEOs expect their companies’ sales to grow over the next six months, but only 36 percent plan to add jobs in the U.S. over the next six months (down from 42 percent three months ago.) And only 43 percent say they expect  to boost capital spending.

Clearly, companies are holding back. And yet, I’m the only person saying this at these conferences. Whaddup with that?

The Conference Board Consumer Confidence Index, which had declined in May, fell further in June, the fourth consecutive moderate decline. Consumer spending stalled in May as stagnant wages and slackening employment continues to put a damper on growth.

So I am supposed to tell economic developers that everything is hunky dory out there right now with strong project flow?

Maybe I’m just delusional. Maybe it’s all just a bad dream. Maybe I should just make happy talk and tell people what they want to hear.

If it means any difference to you, I am optimistic about the long term. Our nation’s economy will eventually rebound to a position of strength because our demographics are good and we remain a favored and chosen place in terms of investment from a worldwide perspective.

But we are in for a bumpy ride for the next year at the very least with unemployment remaining in the 7.5 to 8 percent range amid weak consumer demand and flat wage growth. And that’s regardless of whoever is elected president in November.

By the way, there will be about 40 presidential or head of state elections worldwide in the coming year. And more and more, it looks like stock markets are reacting to government actions as a key driver rather than to traditional factors such as corporate earnings reports.

What governments do, and this is particularly true here at home and in Europe, will matter more to the private sector in terms of how, if and when future investments are made. And with tax and spending measures unresolved in our country, a climate of uncertainty remains. And we all know that uncertainty is never a friend to business investment.

And that, my friends, is why many companies are sitting on their hands.

But Here’s  a Big Honkin’ Deal

Naturally, as I rail on about slowing growth, a very big project is expected to be announced in Alabama as early as Monday

Airbus should create about 2,500 construction jobs to build a new $600 million airliner assembly plant in Mobile, and 400 to 500 full-time jobs once production starts in 2017. The European planemaker, owned by EADS, is poised to announce plans to build the plant for its single-aisle A320 passenger jet that will begin producing four planes a month in 2017. The plant should attract a number of key suppliers to the region, including jet engine makers and companies that produce key aircraft components.

This is a big win for Alabama, a state that has a penchant for announcing big wins in terms of manufacturing projects.This gratifies me because I have an unabashed affection for this state, which I called my home for a good portion of my life.

And while this project has absolutely nothing to do with college football, for some reason, I feel compelled to say “Roll Tide!” and “War Eagle!” in the same sentence, which is unheard of in Alabama.

Dean Barber is the principal/owner of Barber Business Advisors, LLC., a site selection and economic development consulting firm based in Plano, Texas. He can be reached at 972-767-9518 or at dbarber@barberadvisors.com Please visit our website at www.barberadvisors.com

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  1. Hi Dean, there is a certain irony to the Affordable Care Act in that its DNA is linked to Romneycare. As a matter of fact the individual mandate contained in the ACA is a direct decendant of Republican efforts to have persons take personal responsibility. Yes indeed the ACA is complicated and there will be externalities. It will have to be adjusted to reflect realities and unintended consequences. Stay tuned…

    Also kudos to the state of Alabama for their big Airbus win. However I was surprised by your omitting “War Eagle” in your last sentence. The notion that Alabama could win Airbus without the many resources of Auburn University is absurd.

  2. Don, I will do my duty and revise to include a War Eagle if I must.

  3. Dean, I thought this was an excellent article. I always enjoy your comments.

  4. Dean, tell it like you see it is always best…thanks for your straightforward approach; its quite refreshing.

  5. Dean,

    Great article. I agree that this is the big unknown. As I talk to companies through my BRE program, many are hesitant to expand or add employees due to the uncertainty surrounding healthcare. It’s a huge factor in expansion decisions–and it is a negative one at this time.

    Having said that, I would like to add two things on the positive side and another on the negative:
    First, I think the price of natural gas will continue to spur growth in the petrochem industry (unless the feds get their hands on regulating fracking activity). This will trickle down to other support activities as well. Second, if gas prices continue to slide I think consumers will interpret this as a good sign and confidence will grow.
    On the negative side, skilled craft workers continue to be in demand and the pipeline does not look good. My recent mid-year analysis of BRE data suggests that excess production capacity is waning. This means more activity and fewer idle production lines. However, as production picks up, the demand for skilled labor will increase as well, and we are already hurting when it comes to skilled craft workers. Your previous article did address this, and I agree with your assessment. However, a culture change must take place in society (in my opinion) to promote these good, high-payings jobs. Every parent wants to raise a lawyer, doctor, IT guru, or other “desk Job” or “white collar” professional. (I’m sure economic development professionals are NOT on this list, however.) In fact, many skilled craft positions are very challenging and rewarding and offer great careers.
    Just my two cents. Enjoyed the read. Stay in touch.

  6. The Affordable Care Act will be complicate and difficult to implement. The potential for a wide variety of missteps and mistakes made by bumbling but well intentioned bureaucrats is high. I read an article some time ago about how our Farm policy came to be. Today, Congress passes a multi-year farm bill, but that bill and all the legislation came in bits and pieces and evolved over time. And even today it is evolving. Direct payments to Farmers are going away. Will this also hold true for the Affordable Care Act. Over the next ten years, assuming it stays as part of the law of the land, we will see many adjustments and changes as various interest groups get their say and initiate undue influence. Hopefully in this country we will get to a stage where healthcare for all Americans, whether they have a job or not is available and affordable.

  7. Dean, I really enjoy reading your articles. You are the one with the most open mind about what you write about. Most writers today write from their already closed minds. What they want. Very few writers and politicans want anything to do with open discussion of issues.

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