The Global Manufacturer

The Regulatory Cloud Threatens

What could dampen a manufacturer’s spirits after the holidays and months of at least modest economic growth? Let’s try that old reliable – regulations.

“While certainty has been returned to Washington in terms of taxes and spending for the next fiscal year, many businesses remain concerned surrounding the associated costs with benefits, particularly the ACA,” warns Lindsey Piegza, chief economist for Sterne Agee, the financial service firm headquartered in Birmingham, Ala.

Piegza points to the latest Institute for Supply Management - New York business report in which 65% of respondents called “cost of benefits” an impediment to growing their business. She said the report “reaffirms the growing concern in the business community that federal policy is impeding business development and disincentivizing investment, the key to future growth.”

That’s not the only recent report to raise the issue. In the Federal Reserve’s Beige Book, released December 4, 2013, businesses in many districts “voiced concern about future cost increases attributable to the Affordable Care Act and other types of federal regulation,” Piegza pointed out.

Rising health care and insurance costs were the top concern cited by manufacturers in the NAM/IndustryWeek Survey of Manufacturers released December 9. NAM Chief Economist Chad Moutray said the “survey results strongly state that the ACA has had a highly negative impact beyond the health care market, and manufacturers’ concerns are unlikely to fade.”

The ACA concerns are fueled by industry’s twin suspicions of both government and the health care industry. In December, for example, Deloitte released its 2013 Survey of Employers in which 38% rated the health care system a “C” and 29% gave it a “D” or “F.” Only 33% rated it as an “A” or “B.”

Employers showed even less regard for the ACA and its potential to improve the system. Only 22% said the ACA will reduce costs by 2019 and just 19% said it will improve the quality of care by that time.

“Employers are balancing on a precipice at the moment,” said Rick Wald, a director at Deloitte Consulting. “On the one side, they are dissatisfied with the health system and feel a need to take more action. On the other side they are watching to see if the health reform measures gain traction. One way or another, corporate America is likely to make significant moves around health care because the status quo isn’t sustainable.”

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