During a hearing conducted by the House Committee on Small Business’s Subcommittee on Healthcare and Technology, lawmakers, policy analysts, academics and a business owner expressed varying opinions on how the Affordable Care Act has and will continue to impact small businesses and the economy. The focus of the hearing – Small Businesses and PPACA: If They Like Their Coverage, Can They Keep It? – was on whether and to what extent the law will raise the cost of providing health insurance, and whether it will encourage small employers to abandon the provision of coverage altogether.

Opening the hearing, Chairwoman Renee Ellmers (R-NC) claimed that the Affordable Care Act’s taxes, employer mandates, regulations and administrative burdens will force many small businesses to drop their coverage. She cited one study claiming that up to 80% of small firms will have to relinquish their plans’ grandfathered status by the year 2013, and accused the small business tax credit established to help offset the cost of providing insurance of being both temporary and too narrow.

Ranking member Cedric Richmond (D-LA), however, challenged this argument, stating that the rising cost of health insurance coverage is an employer’s greatest barrier to offering coverage, and that the Affordable Care Act will ultimately lower these costs and provide small employers with greater choices and buying power through the health insurance exchanges, to be created in 2014.

Steven B. Larsen, Deputy Administrator and Director, Center for Consumer Information and Insurance Oversight, Centers for Medicare and Medicaid Services, echoed this position. He testified that currently, small employers pay approximately 18% more in health insurance than do larger firms, as they lack the larger firms’ purchasing power and administrative resources, and face more volatile pricing policies due to their smaller risk pool. Larsen stated that the Affordable Care Act addresses many of these issues by the creation of the insurance exchanges, particularly through the Small Business Health Options Program (SHOP) which, he said, will enable small businesses to pool their buying power and therefore give them some of the advantages enjoyed by larger firms.

When asked about what types of services and benefits will be part of the minimal essential health benefits package that must be offered in a qualified health plan, Larsen stated that the Department of Health and Human Services plans to issue guidance on this topic in the fall of this year.

Larsen also denied the claim that the Affordable Care Act’s employer mandates will result in a decline in employer-sponsored coverage. He stated that by and large, small businesses will continue to offer coverage once the mandate provision takes effect. Larsen cited studies by the Rand Corporation and Urban Institute that support this belief.

When questioned about how the requirement that plans must spend at least 80% of premiums on health care and services – as opposed to administrative costs – would affect the provision of health care, Larsen explained that this medical loss ratio (MLR) requirement “is an important and helpful provision for small businesses,” as it “drives efficiency” and “creates value” for the plans themselves. He did not believe that the Affordable Care Act provisions would ultimately drive small businesses out of the market of providing insurance coverage to their employees.

Professor Timothy Stoltzfus Jost of the Washington and Lee University College of Law acknowledged that the studies on the impact the Affordable Care will have on an employer’s decision to offer insurance vary wildly, but that “most studies predict coverage will not change dramatically,” adding that he had “every reason to believe the [Affordable Care Act] will not dramatically change coverage in the United States.” As for the MLR, he claimed that this provision will have a “dramatic effect” on reducing health care costs for employers. He explained that the growth rate of health care costs has been dropping, while insurance profits have been rising. Therefore, if insurers are required to spend 80% of premiums on coverage, premiums will drop as a result. When questioned about whether the Affordable Care Act is constitutional, Stoltzfus Jost predicted that the Supreme Court will ultimately uphold the law’s constitutionality based on Congress’s power to regulate interstate commerce.

Other panelists testifying at the hearing, however, expressed less rosy views about the law’s effects. Douglas Holtz-Eakin, President of American Action Forum, claimed that the ability of small businesses to provide insurance to their employees hinges upon the businesses’ ability to grow, and that many provisions in the Act work against this goal. He also estimated that the Act will result in higher insurance costs and increased premiums, and will encourage employees to avail themselves of the insurance exchanges and for employers to drop coverage.

Similarly, William Dennis, Jr., Senior Research Fellow with the National Federation of Independent Business (NFIB), claimed that the law hurts small businesses, and that the small business tax credit is inadequate. He cited the NFIB’s recent survey of small businesses (those with fewer than 50 employees) that found an estimated 245,000 (out of 5,228,000 employers with fewer than 25 employees) are eligible for a full Affordable Care Act tax credit, and another 1.165 million are eligible for a partial credit. Generally, he stated that not much will change coverage-wise in the coming year. Those employers that offered coverage will continue to do so, while those that did not have no plans to offer coverage in the future.

Speaking on behalf of the United States Chamber of Commerce, business owner Brian Vaughn testified that as a result of the employer mandates, he would likely have to restructure his business by employing fewer full-time employees. He criticized the Affordable Care Act’s disallowance of limited benefit (“mini-med”) plans, which he claims are an affordable option for low-income and part-time employees. Overall, he said that the Act discourages small businesses from expanding.

A list of panelists and links to their testimony can be found here.