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By Dana Tims February 6, 2014

Are people having to shrink back their businesses because of Obamacare?

Editor's note: The ruling statement on this report has been changed to clarify that we're fact-checking the law's effects on some businesses in Oregon. The original statement was simply, "People are having to shrink back their businesses as a result of the law."

Controversy surrounding the Affordable Care Act isn’t going away anytime soon.

Republicans have vowed to make Obamacare a central theme of the 2014 campaign, while Democrats insist that troubles with the initial rollout are subsiding and that millions of Americans now have health insurance as a result of the law. A new congressional report on the law, meanwhile, appears to stoke potential arguments on both sides.

U.S. Senate candidate Monica Wehby toured Oregon recently, meeting with 100 business owners in as many days. Wehby is running for the GOP nomination to face Sen. Jeff Merkley, D-Ore. During a stop in La Grande, Wehby said the new law threatens to hinder Oregon’s efforts to dig out of the Great Recession.

"We obviously have a lot of concerns about the health care law," she told a gathering of about 15 people at a La Grande coffee shop. "People are having to shrink back their businesses as a result of the law."

There have been many claims about the Affordable Care Act, but this one caught our attention. Is the law causing businesses to shrink? PolitiFact Oregon checked.

We contacted Wehby’s campaign and got a response from Charlie Pearce, her communications manager. In addition to providing links to national news stories reporting that some major companies are cutting employee hours to avoid ACA-related insurance costs, he directed us to Robert Decker, owner of Westcare Healthcare Management in Salem, a company that operates health care facilities for veterans and the disabled in several states.

Decker said costs associated with the new law prompted him to sell three care facilities in Idaho in 2012. When he ran the numbers, he found it would cost him between $800,000 and $1 million to provide health insurance for the 650 employees he had in Idaho at the time. Spending that much money on insurance, Decker said, would have rendered those businesses unprofitable.

"The health care law was a big driving force in our selling those facilities," Decker said. "It had a big impact on us, no question."

Two supervisors with the company that bought the bulk of Westcare Management’s Idaho holdings confirmed the March 2012 sale. Both declined to give their names, saying they weren’t authorized to speak publicly about the transaction. The company’s human resources director did not return our calls.

To gauge the accuracy of Decker’s health-care costs claim, we called T.J. Sullivan, a partner in Huggins Insurance in Salem. His agency has been advising Oregon businesses on how the health care law affects them.

The average premium for ACA-approved business plans runs about $250 to $300 a month, he said, with management picking up about half of that. Assuming costs of $125 per month for 650 workers, Westcare Management’s costs under the new law would run roughly $975,000 annually, Sullivan said. On that score, Decker’s assertion checks out.

Decker’s company is privately held and he declined to discuss profits, however, so we weren’t able to independently verify that a cost of $800,000 to $1 million would have rendered the businesses unprofitable.

Sullivan said he has seen effects of the new law locally, as well.

One provision, the so-called employer mandate, has been delayed until 2015. It requires businesses that employ more than 50 people --  who all work at least 30 hours a week -- to provide insurance to their workers. However, Sullivan said he is working with at least one Salem-area company in that category that’s trimming hours to get employees under 30 per week.

The company has multiple locations and employs about 100 Salem-area residents. The company’s owner, Sullivan said, is aiming to trim work hours to get 60 to 75 of those employees under the 30-hour threshold. The owner isn’t hiring workers to fill the gap -- nor laying anyone off, Sullivan said.

He declined to name the company, saying that he wanted the owner to speak for himself. The owner did not return our calls. From Sullivan’s description, however, the business is "shrinking."

A new report from the Congressional Budget Office suggests that the new law will mean losses equal to 2.3 million full-time jobs by 2021 as hours are reduced. The report contains an important caveat, however, in noting that many of those losses will be voluntary as people opt to keep their incomes low to remain eligible for federal health care subsidies or Medicaid.

Next, we wondered whether state employment data reflect either trend -- larger companies not hiring that 51st employee or smaller ones hiring more part-time employees to avoid health-insurance requirements.

Not according to a blog entry posted Nov. 6, 2013, by Josh Lehner, senior economist in the state Office of Economic Analysis.

"Here in Oregon," Lehner wrote, "over 90 percent of the jobs added between 2009 and 2012 have been full-time positions, on net."

Later in the post, he added, "Of course, the so-called ‘employer mandate’ under the health law doesn’t take effect until 2015, so it’s possible that employers are simply waiting to cut hours until closer to the deadline. But there’s little evidence they’ve started yet."

Clarity on the issue may not be coming anytime soon. According to Mark McMullen, Oregon state economist, "This is a really tough one to get a handle on. Even after enough time has passed for the impacts of the law to show up in the aggregate data, these impacts will be difficult to isolate."

Oregon, like the rest of the country, continues to wrestle with the Affordable Care Act. The two major political parties are largely split on whether it represents government overreach or the best way to control health-care spending while providing insurance to those who don’t have it.

Wehby told a small audience in La Grande that "People are having to shrink back their businesses as a result."

It’s true that Wehby said businesses are "having" to shrink their operations. There’s a nuance there suggesting businesses are being compelled to make cuts. Because we can’t assess motives, we chose to look more narrowly at whether businesses are or are not making cutbacks in response to the law, accepting that the overwhelming majority would be acting with their businesses’ bottom line in mind.

Wehby’s campaign provided an example of a significant scaling back of an Oregon-based business, though aspects could not be independently verified. She also gave us links to national news stories reporting similar cuts elsewhere. An Oregon consultant also outlined an example of a business trimming employee hours as a result of the law.

We rate her claim True.


Our Sources

Telephone interviews, T.J. Sullivan, partner, Huggins Insurance, Jan. 30, 2014/Feb. 4, 2014.

Telephone interview, Robert Decker, owner, Westcare Management, Salem, Jan. 30, 2014.

Telephone interviews, Embassy Management employees, Feb. 4, 2014.

Email exchange, Josh Lehner, senior economist, Oregon Office of Economic Analysis, Jan. 30, 2014.

Email exchange, Mark McMullen, Oregon state economist, Jan. 30, 2014.

Congressional Budget Office report, "The Budget and Economic Outlook: 2014 to 2024," Feb. 4, 2014.

Newspaper story, La Grande Observer, Jan. 13, 2014.

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