Affordable Care Act at Four: Regulatory Costs Exceed Benefits by Twofold

After four years of implementation, countless delays, a website disaster, and constant litigation, the Affordable Care Act (ACA) celebrates its inauspicious birthday this week. From a regulatory perspective, the law has imposed more than $27.2 billion in total private sector costs, $8 billion in unfunded state burdens, and more than 159 million paperwork hours on local governments and affected entities. What’s more troubling, the law has generated just $2.6 billion in annualized benefits, compared to $6.8 billion in annualized costs. In other words, the ACA has imposed 2.5 times more costs than it has produced in benefits.

Most Burdensome ACA Regulations by Paperwork


Paperwork Burden Hours

Small Business Reporting: Form 8941

40.2 Million

Net Investment Income Tax

24 Million

Medicaid Eligibility Changes

21.3 Million

Medicare, Medicaid, CHIP: Transparency

10.5 Million

Individual Mandate Penalty

7.5 Million

Total: 103.5 Million Burden Hours 

Paperwork Burdens

At more than 159 million paperwork hours, the ACA is in a class by itself. To date, Dodd-Frank, an equally transformational law, has imposed “only” 60 million hours of paperwork. Sarbanes-Oxley financial reform legislation, passed in 2002, imposed 11.4 million hours.

To put the ACA’s paperwork burdens in perspective, it would take 79,518 employees (more than the population of Napa, California) working 2,000 hours annually to complete the ACA’s paperwork mandates. These burdens obviously cost states and private entities time and money, which could otherwise be devoted to productivity, not regulatory compliance.  

These burdens have had a notable impact on the paperwork budgets of the Department of Health and Human Services (HHS) and the Department of Treasury. When President Obama signed the Affordable Care in 2010, HHS’s total paperwork burden was 541 million; today, HHS imposes more than 631 million hours of paperwork, an increase of roughly 90 million hours. Perhaps more remarkably, Treasury, which has had to implement several of the most burdensome mandates and penalties, has undergone an even more profound jump in regulatory requirements. In 2010, it imposed 6.3 billion hours of paperwork; today, it imposes more than 7.8 billion hours of paperwork, an increase of 23 percent.


In the past year, the administration implemented the individual mandate and parts of the employer mandate. Examining the statutory language, it would appear that mandating health insurance would impose significant burdens on individuals and employers. However, the administration’s analysis largely punts on these questions.

The only regulatory analysis of the individual mandate is through the Paperwork Reduction Act. The administration estimates that 36 million Americans would spend 12.6 minutes complying with the mandate, for a total of 7.5 million hours annually. Beyond that figure, however, there are no other estimates for the regulation’s economic impact.

The employer mandate dodged regulatory analysis completely. The Small Business Administration (SBA) criticized the paucity of analysis: “Specifically, the SBA Chief Counsel for Advocacy stated the proposed regulations imposed a collection because they require employers to maintain records.” There are no listed costs, benefits, or paperwork requirements in the employer mandate regulation. The administration ignored the SBA, and the public has little knowledge of the law’s broader impact.

For what the administration has released, the public knows the law has $6.8 billion in recurring annual costs, compared to just $2.6 billion in monetized benefits. For comparison, higher taxes from the “American Taxpayer Relief Act of 2012” will impose an additional $42 billion in burdens this year. ACA regulations will compound that figure, resulting in close to $49 billion in burdens from new taxes and ACA implementation alone.

Employment Impact

Plenty of ink has been spilled over the employment effects of the ACA. The Congressional Budget Office fueled the debate when it released a report estimating the law would “reduce the total number of hours worked, on net, by about 1.5 percent to 2.0 percent.” The administration spun the report as good news, as the ACA was going to eliminate “job lock.”

However, the CBO report was anything but good news for the administration or for the labor force. As AAF President Douglas Holtz-Eakin noted, “[The ACA] raises wages needed to lure those recipients from their homes to the workplace – ObamaCare makes those 2.5 million jobs too expensive to be profitable and effectively kills them off.”

Small Business Impact

The policy implications of the employer mandate, the parts that have been implemented, and the meager tax credit are well known. Perhaps less obvious are the numerous occasions when the administration conceded its ACA rules would impose significant costs on small businesses.

Under the Regulatory Flexibility Act and its amendments, agencies must determine if a regulation would impose a “significant economic impact on a substantial number of small entities” (SISNOSE). Agencies do not explicitly define this term, but HHS states that if a rule reduces revenue or raises prices by 3 to 5 percent within a five-year period, it imposes a SISNOSE. Regulations rarely trigger this threshold, but to date, the ACA has published 11 regulations that would have a significant economic impact on small businesses. 

ACA Rules Burdening Small Businesses



Paperwork Burden

Proposed Menu Labeling

$757.1 Million

622,000 Hours

Final Shared Savings Program

$451 Million


Proposed Vending Machine Labeling

$423.1 Million

842,000 Hours

Final Physician Fee Schedule

$172.9 Million

365,197 Hours

Proposed Covered Outpatient Drugs

$81.4 Million

391,212 Hours

Final Billing for Skilled Nursing Facilities

$29.93 Million

913,884 Hours

Final Payment Policies

$11.58 Million

196,509 Hours

Final Patient Notification Requirements

$2.55 Million

138,032 Hours

Final Outpatient Prospective Payment


1,010,876 Hours

Final Inpatient Prospective Payment


6,838,293 Hours

Final Hospital Payment System



Aggregate Small Business Impact: $1.9 Billion and 11.3 Million Hours

The listed costs of $1.9 billion and 11.3 million hours are as reported by the agencies, taking everything listed in the Federal Register at face value.  However, the reality for millions of affected firms is a regulatory tax of 3 to 5 percent, a burden the administration admits. These burdens will appear nowhere on CBO’s fiscal tables, but they will undoubtedly affect health insurance coverage, consumer products, and the amount of time Americans spend completing federal paperwork.


Last year, AAF predicted: “If past is prologue, the 2014 report on ACA burdens will catalogue higher costs, more paperwork, and additional layers of red tape on the U.S. healthcare system.” The results are in: $4.5 billion in higher costs and 48 million more paperwork hours. Without significant reforms, expect similar results in 2015.

[1] According to the rule, “These requirements are exempt from the PRA [Paperwork Reduction Act] in accordance with the provisions of the Affordable Care Act.” 75 Fed. Reg. 72238.