The Heritage Foundation is promoting the GOP argument that health care reform is a “job killer” by offering this profile of an IHOP franchise that will have to spend thousands of dollars to offer health insurance coverage to its employees:

Under the year-old law, Womack must provide health insurance to all full-time employees beginning in 2014. Right now, he employs nearly 1,000 full- and part-time workers and already offers insurance to his management staff. He simply does not know how he’ll generate the revenue to do more.

Womack estimates the cost of the law to his company will be 50 percent greater than his company’s earnings — in other words, beyond his ability to pay.

That’s not because his company of 12 IHOP restaurants in Indiana and Ohio is unprofitable. Quite the opposite, in fact. By industry standards, he’s doing well. But labor-intensive restaurants generate profits of just 5 percent to 7 percent per employee.

Watch it:

Now, it’s certainly true that some businesses will have to spend more on health care coverage under the new law, but here, Heritage really did its homework in finding the exact kind of business that will be most affected by reform. Step back a moment and realize that the premise is wrong at the outset: businesses are not required to provide coverage under the law, as the Heritage piece claims. Rather, businesses with more than 50 employees (like this chain of IHOP stores) that do not offer insurance would be required to pay a penalty of $2,000 per full time employee (minus the first 30 employees) if any employee receives subsidized coverage through the exchange.

As the Urban Institute’s John Holahan and Bowen Garrett explain, on the aggregate, the impact on businesses is minimal:

Smaller businesses: Premium contributions for firms with fewer than 100 employees would fall by 8.2 percent “because such firms have the option of purchasing coverage in the new Small Business Health Options Program (SHOP) exchanges, where administrative costs will be lower than in current markets, and premiums will fall as a result.” Firms under 50 employees are exempt from any employer requirement and will also have access to tax credits to help offset the cost of coverage. Firms with more than 80 workers “would pay $2.0 billion in assessments if their full-time employees receive subsidized coverage through the exchange. On balance, taking premiums and assessments into account, small businesses would save 8.7 percent compared with their current premium contributions” and would have more dollars to grow their businesses.

Firms between 100 and 1,000 workers: Medium-sized firms that don’t offer coverage (more than 95% already do) would pay, in aggregate, “$11.8 billion in assessments due to full-time employees obtaining subsidized coverage through the exchange.” However the total amount in assessments “is very small in comparison to wages and salaries in the United States (0.2 percent of the $6.4 trillion wage base) so any negative impact on jobs must also be small.”

The law assumes that employers have a responsibility to fund health care reform and increase access to coverage, to be sure, but Heritage purposely cherry picked this IHOP businesses and then exaggerated the affects of the law. For instance, Womack estimates that he would have to spend $7,000 to $10,000 per employee, when in reality the penalty for not offering coverage is $2,000 per every full time worker minus the first 35 (the video and blog post suggest that he would have to spend $7,000 for all 1,000 employees).

The effects of the law on Womack’s business may be difficult to calculate, but these exaggerations only serve to complicate that picture, suggesting that the law would pull the rug from under small businesses without detailing any of the benefits of reform. Towards the end of the video, Rep. Mike Pence (R-IN) suggests that “the real answer” for businesses who can’t afford health insurance today “is to simply lower the cost of health insurance,” which ACA is projected to do. According to the CBO, reform will reduce average premiums for employers with more than 50 employees by up to 3% and successful delivery system reforms like bundling payments, accountable care organizations, medical homes and care coordination could further lower the growth of health care spending. All this would result in more jobs and higher family incomes — allowing Womack to invest more dollars into his restaurants and expand operations.

Politico’s Sarah Kliff has the best rundown of where states stand as they move to implement the most important element of the Affordable Care Act: the state based exchanges that will serve as regulated market places for insurance beginning in 2014. Under the law, if states fail to establish their own exchange, the federal government will build one for them — something a surprisingly high number of conservative states are willing to accept. From Kliff’s piece:

- LOUISIANA: When asked whether [Gov Bobby] Jindal would support or sign off on legislation authorizing a health exchange, press secretary Kyle Plotkin said, “No. Obamacare is a terrible policy that needs to be repealed and replaced. It creates enormous new costs and future unfunded liabilities for states financing their Medicaid programs.”

- FLORIDA: Republican Gov. Rick Scott has been unequivocally clear in his opposition to the health reform law and its implementation. “We’re not doing anything with regards to the exchange, I don’t believe in the exchange” he told POLITICO in an interview at the National Governors Association meeting last month.

- MONTANA: The Republican-run state Legislature has come out aggressively against the health reform law, pushing forward on legislation not only to block a health exchange but also to compel its attorney general to join a lawsuit challenging the overhaul. Legislation to authorize a health exchange has meanwhile languished in committee.

- GEORGIA: The Georgia Tea Party Patriots showed serious muscle last week when they squashed a bill, approved by the Legislature and sitting on Republican Gov. Nathan Deal’s desk, that would have authorized a health exchange commission. With the legislative session wrapping up in mid-April, it’s unlikely that any other exchange legislation will move this year.

- ALASKA: Gov. Sean Parnell (R) has waded gingerly into the issue of health exchanges, announcing last week that he would take action to study the issue of health exchanges but not pursue the $1 million planning grant.

For one thing, this is counter-intuitive. Republicans are relying on the federal government to expand coverage to state residents, helping bring about the very thing they fear — greater government involvement in the health care sector — while most Democrats (many of whom are moving forward with exchange construction and design) are actually employing state-based solutions.

The GOP will argue that the exchange requirements are confining and burdensome — you may even hear that they’re a top-down-solution to a state problem. But in reality, states will have a good deal of flexibility in designing and forming the exchanges. They will be able to run their own insurance marketplaces (or partner if with other states), determine which insurance companies can offer coverage and establish benefit rules in their exchanges. But surprisingly, Republican governors are giving up that flexibility in favor of a federal intervention.

Republicans in the House successfully passed the “Repealing the Job Destroying Health Care Law Act” — health care repeal — in January, but have always had a hard time explaining how the law destroyed jobs beyond a few well chosen (and poll tested) buzz words. “What we believe is that Obamacare has been a job killer,” House Majority Leader Eric Cantor (R-VA) explained on MSNBC’s ‘Morning Joe’ on January 6th. “If you look at what’s going on in the regulatory arena in this town, the agencies have followed up the passage of that bill by implementing some real job killing regulations.”

This argument never made a whole lot of sense (partly because HHS has gone out of its way to accommodate business concerns and grant them waivers from some requirements) and now a new report from the Urban Institute’s John Holahan and Bowen Garrett concludes that the law will “not have a noticeable effect on net levels of employment” for three reasons:

- First, the overall economic effects of the law are simply too small relative to the overall size of the economy to have much of an effect on employment.

- Second, there are many offsetting effects. The tax provisions in the law will reduce the demand for labor in many sectors and the Medicare cuts by themselves would reduce employment in the health sector, but the expansion of coverage through Medicaid and income-related subsidies in the exchanges would have the opposite effect on spending and employment.

- Third, the new law will not affect most firms, either because they already provide health insurance meeting the new federal standards, or they are exempt from the new requirements (firms with fewer than 50 workers).

It’s worth pointing out that some economists argue that the ACA’s changes the delivery of health care would improve efficiency and productivity, leading to job creation — something this report does not quantify.

Holahan and Garrett do debunk the notion that reform will encourage employers to dump their workers into state-subsidized exchanges, writing: “This is because firms would need to compensate the workers from whom they remove a current benefit, particularly higher income workers, who would lose the valuable tax advantage of ESI,” Holahan and Garrett conclude. “[T]here is little scope for firms being able to save money from dropping ESI [employer sponsored coverage] coverage except perhaps in firms where most workers have low wages as well as low family incomes, and these types of firms are the least likely to offer ESI today.”

This isn’t to say that businesses aren’t anxious about rising health care costs or the impact of the various health care provisions on the bottom line. But thus far, HHS has been quite flexible in how it implements the measure and a growing number of employers are taking advantage of the tax credits and the early retiree benefits. The biggest problem is that many businesses are still confused about the impact of the law, something that’s likely to dissipate as the law is implemented further.