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Massachusetts health-care reform tests impact of employer 'tax' on jobs

After six years of reform, Massachusetts has the highest rate of health-care coverage in the US, but effects of its 'tax penalty' on employers are less clear. Some fear penalties are hamstringing job creation.

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“If I had to all of sudden put 50 employees on the payroll, boy, we wouldn’t be in business, plain and simple,” Mr. Vincent says. “We’d have to charge $15 a ticket to meet all the cost expectations. We’d have to price ourselves out of the market.”

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Ms. Giblin, who owns Draper Metal Fabrication in Holbrook, Mass., along with her husband, says they’ve provided health care for their employees since before then-Gov. Mitt Romney signed the state's health-care reform into law. Employees pay 40 percent of their coverage, while the company picks up the rest. Health-care costs have increased by double digits for years now, she says, dating back to before the state law went into effect. Two years ago, the company dropped down a tier in coverage, forcing employees to pay more out of pocket and higher deductibles.

With sales steady at about $1.5 million to $2 million annually, the company kept pace with orders at its current payroll, Giblin says. The company has yet to consider dropping coverage, but for other small businesses, she says the 11-employee threshold is an obstacle to hiring.

“It’s definitely not an incentive, and with all the horrible economic factors out there, you don’t need a nonincentive,” she says.

So far, evidence that the Massachusetts law has depressed hiring is largely anecdotal. A Boston-based think tank, the Beacon Hill Institute, estimates that the law has depressed hiring by at least 18,000 jobs, though some experts dispute that conclusion. Unemployment in Massachusetts has consistently been lower than the national average; as of May, the rate stood at 6.0 percent, the lowest since October 2008.

“Employers here don’t like a lot of government intervention, but I think they have adapted,” says Sandy Reynolds, executive vice president with Associated Industries of Massachusetts, which represents 6,000 employers across the state.

State legislators are trying to hammer out changes to try to slow the growth of health-care costs, says Bill Vernon, state director for the National Federation of Independent Businesses. They are also trying to make it easier for employers to meet the threshold for “fair and reasonable” coverage by allowing them to include employees who get insurance, for example, through a spouse or a government program.

“When we passed the law, we never addressed the cost of health insurance," Mr. Vernon says of the Massachusetts statute. "We addressed access, we accessed coverage, and here we are six years later, trying to control the costs."

Despite grumblings, polls show that the Massachusetts law remains popular with residents. Jonathan Gruber, an MIT economist who was instrumental in crafting the state law, says that for President Obama to win reelection, he’ll have to convince Americans of the federal law’s benefits.

“If the American public understands this law, they’ll feel about it like we do in Massachusetts, where there’s, what, two-thirds support for it,” Mr. Gruber says. “It’s not that we’re all crazy lefties here, OK? It’s that it’s a good law and people understand it here.”

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