At Work

Growing The Economy… Err making growth more difficult

It is not clear to what de­gree these laws[Dodd-Frank, ACA] af­fect business for­ma­tion, but in a 2010 report for the Of­fice of Ad­vo­cacy of the U.S. Small Business Administration, researchers at La­fayette Univer­sity found that the per employee cost of fed­eral reg­u­la­tory com­pliance was $10,585 for busi­nesses with 19 or fewer employees, compared with $7,755 for com­pa­nies of 500 em­ploy­ees or more [then add state compliance]. Large and estab­lished businesses nav­i­gate through rules and com­pli­ance require­ments. Small and new businesses of­ten find them pro­hibitive.

Critics of health care claim a primary driver of health care costs is the cost of administration. It’s certainly a factor, but regulatory compliance and related administration permiates every business, adds to the cost of doing business and certainly adds to the cost of providing employee benefit programs to workers leading in some cases to a reduction if not elimination of those benefits which translates into less total compensation. 

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3 replies »

  1. One more time on health reform.

    If you are an employer, you have to be concerned about compliance with the employer shared responsibility rules – IRC 4980H. This crap is sooooo complicated that the IRS recently put out a calculator to help employers figure out, …

    Take a guess….. No, it is not a tool/calculator to figure the penalty,

    It is a calculator to give the small employer insight as to whether the penalty applies to that employer for a specific year.

    See: http://taxpayeradvocate.irs.gov/estimator/esrp/

    To use the calculator, you have to know, in advance, how the IRS uniquely defines, for purposes of Health Reform, certain “Key Terms” (no idea how many non-Key terms there are), including but not limited to:
    Administrative Period
    Affordable Coverage
    Aggregated Group
    Applicable Large Employer Member
    Applicable Large Employer (ALE)
    Employee Resuming Service
    Full-Time Employee
    Full-Time Equivalent Employee (FTE)
    Hours of Service
    Initial Measurement Period
    Look-Back Measurement Method
    Minimum Essential Coverage
    Minimum Value
    Monthly Measurement Method
    New Employee
    Ongoing Employee
    Seasonal Employee
    Seasonal Worker
    Section 4980H(a) Applicable Payment Amount
    Section 4980H(b) Applicable Payment Amount
    Stability Period
    Standard Measurement Period
    Variable Hour Employee

    No wonder this is perceived to be a job killer – unless that is, you are a lawyer or a federal employee.

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  2. Try this one on for size

    A couple of economists published a study last year that suggested housing restrictions in just three US cities – NYC, SFO and San Jose – substantially inhibited productivity that had those restrictions been reduced to the median level in other US cities, it would have added 9.5% to US GDP!

    http://faculty.chicagobooth.edu/chang-tai.hsieh/research/growth.pdf

    “… We study how growth of cities determines the growth of nations. … Despite some of the strongest rate of local growth, New York, San Francisco and San Jose were only responsible for a small fraction of U.S. growth in this period. By contrast, almost half of aggregate US growth was driven by growth of cities in the South. … increased wage dispersion lowered aggregate U.S. GDP by 13.5%. Most of the loss was likely caused by increased constraints to housing supply in high productivity cities like New York, San Francisco and San Jose. Lowering regulatory constraints in these cities to the level of the median city would expand their work force and increase U.S. GDP by 9.5%. We conclude that the aggregate gains in output and welfare from spatial reallocation of labor are likely to be substantial in the U.S., and that a major impediment to a more efficient spatial allocation of labor are housing supply constraints. …”

    And, that is just housing…

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  3. I agree that government bureaucracy impacts most business. However, they seem to have a special focus on health care after the Patient Protection and Affordable Care Act of 2010. Just a day or so ago, we got another 117 pages of proposed regulations – “… This document contains proposed regulations on the rules for expatriate health plans, expatriate health plan issuers, and qualified expatriates under the Expatriate Health Coverage Clarification Act of 2014 (EHCCA). This document also includes proposed conforming amendments to certain regulations to implement the provisions of the EHCCA. Further, this document proposes standards for travel insurance and supplemental health insurance coverage to be considered excepted benefits and revisions to the definition of short-term, limited duration insurance for purposes of the exclusion from the definition of individual health insurance coverage. These proposed regulations affect expatriates with health coverage under expatriate health plans and sponsors, issuers and administrators of expatriate health plans, individuals with and plan sponsors of travel insurance and supplemental health insurance coverage, and individuals with short-term, limited-duration insurance. In addition, this document proposes to amend a reference in the final regulations relating to prohibitions on lifetime and annual dollar limits and proposes to require that a notice be provided in connection with hospital indemnity and other fixed indemnity insurance in the group health insurance market for it to be considered excepted benefits.”

    Three years ago in October 2013, we already had 11,000+ pages (3+ feet tall stack) of health care reform regulations. It has certainly doubled since then. Didn’t know they piled crap that high, did you?

    Understand?

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