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KSM Blog | Katz, Sapper & Miller CPA

Unknown Variables in the Affordable Care Act Sends Fear Skyrocketing Nationwide

Posted 12:00 PM by

And the list grows. In addition to concerns relating to revenue growth, attracting/retaining skilled workers, and rising material/energy costs, manufacturers nationwide are facing catastrophic levels of uncertainty regarding the Affordable Care Act (ACA). According to the latest National Association of Manufacturing (NAM) IndustryWeek Survey, more than 77% of manufacturers identified rising health care and insurance costs as their most important challenge. Health care costs have topped the list of challenges in every year that the survey has been conducted, and manufacturers’ concerns are unlikely to fade anytime soon.

Regardless of size, manufacturers believe the ACA severely limits their ability to deploy capital and create new jobs. According to the survey, over 90% of manufacturers said their health insurance premiums had increased, and roughly 58% have had to increase employee copays. Over 27% have needed to change existing coverage, and 17.6% had to switch insurance providers to reduce health insurance costs. The survey did point out that only 2.7% of manufacturers dropped employees from their insurance. All of these factors will likely worsen the skills gap concerns already facing the industry as benefits are cut for workers. 

The impact of the uncertainties surrounding the ACA has forced owners to make other tough decisions. Nearly one-third said they reduced their outlook for 2014, and roughly 23% have reduced employment or stopped hiring altogether. Also, approximately 20% of survey respondents have reduced or slowed investment into their business. 

There is no silver bullet solution to the ACA’s potential pitfalls. The manufacturing industry may find it prudent to bite the bullet and cover higher premiums in order to maintain a domestic workforce, which will lead to expanding operations over time. However, if additional costs are passed on to a consumer who is unwilling or unable to pay them, the commitment to onshoring manufacturing could become futile. The key to preserving the health of U.S. manufacturing will lie in the industry’s ability to navigate the new costs.

What can policymakers do in 2014 to support a pro-growth manufacturing environment? According to the survey, 86.3% of manufacturers believe finding a long-term solution to the nation’s budgetary challenges will improve manufacturing conditions. Also, slowing entitlement spending (80.5%), reducing the regulatory burden on businesses (76.9%), controlling rising health care costs (70.8%) and passing comprehensive tax reform (67.5%) were of significance. As we dive into 2014, the implementation of the ACA and the possibility of another budget impasse, it is quite uncertain for many what kind of year it will be.

About the Author
Tim Murphy is a manger in Katz, Sapper & Miller’s Audit and Assurance Services Department. Tim audits and reviews financial statements, and he advises clients on accounting, reporting, compliance, and internal control matters. Connect with him on LinkedIn.

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