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Some employers say reform limits hiring

By Melanie Evans
Posted: March 7, 2013 - 2:00 pm ET

Wary employers are warning of possible future job cuts as they face the “unknown effects” of healthcare reform, according to a newly released look at the U.S. economy.

Businesses, economists and market experts surveyed for the Federal Reserve's Beige Book report, an anecdotal snapshot of jobs, wages, prices and consumer spending, also said the Patient Protection and Affordable Care Act helped to restrain consumer spending, along with the expired payroll tax holiday.

Depending on payroll size, employers could face penalties under the health reform law starting next year. Employers that do not offer insurance or offer unaffordable insurance could be penalized if a full-time worker buys subsidized insurance through newly created health insurance exchanges. Individuals also face potential penalties if they lack health insurance.

The law's potential damper on hiring was widely noted. “Employers in several districts cited the unknown effects of the Affordable Care Act as reasons for planned layoffs and reluctance to hire more staff,” the report said, and staffing companies said employers have responded to the law by “hiring the absolute minimum to get by.”

However, the health reform law was projected to increase “relatively weak” demand for healthcare services, the report said. And new regulation has led to a boom for healthcare accountants and consultants.

An expected increase in healthcare costs contributed to weaker consumer confidence, the Beige Book report said. Manufacturers and energy companies described difficulties with rising premiums. Higher healthcare costs will likely mean more expense for some household, the report said. “Costs for healthcare and other benefits continued to increase; some contacts noted that they were passing along the higher costs to employees.”

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