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Expert Advice for Medium and Midsize Businesses

The Regulatory Outlook for SMBs in 2018

Last year, the small business community witnessed something different from Washington: A period of limited regulatory actions and a scaling back of rules—both big and small—from federal agencies.

According to the current Administration, federal agencies have far exceeded their 2017 goal of reducing two regulations for every one proposed. The elimination of this red tape has achieved $8.1 billion in lifetime regulatory savings, the equivalent of $570 million per year. So, what does this mean for small and medium-sized businesses in 2018?

Legislation to Institutionalize New Regulatory Changes and Philosophy

The regulatory process (otherwise known as “how the sausage is made” in federal agencies) has not changed in more than 70 years. The business community and reformers have been working to update the Administrative Procedures Act (APA), which governs how federal rules are created and made. This year may be the year this is accomplished.

For small- to-medium businesses (SMBs), the House of Representatives has passed the Small Business Regulatory Flexibility Improvements Act (H.R. 33), which gives entrepreneurs a voice in the rule-making process. This bill would require agencies to conduct cost-benefit analyses and confer with entrepreneurs much earlier when regulators are determining whether to draft a rule or not. 

A similar bill in the Senate (S. 584) has also advanced in committee and a floor vote could come in early 2018. This means creating meaningful legislation to update the regulatory process, and making it more accountable and transparent, may actually be signed into law in 2018. It would be good news for SMBs as they are disproportionately burdened by government regulation.

Healthcare and the Future of the Affordable Care Act

SMBs are optimistic about growth in 2018 and are generally happy about where the regulatory agenda is headed. But, one key area is weighing down their operations: rising health coverage costs.

For most businesses, the promise of lower costs and more choices has not materialized under the Affordable Care Act (ACA). While steps have been taken to bring more competition to the market, additional work remains. The problem with limited choices and high costs is largely a regulatory issue–SMBs can expect more focus from Congress and the Administration to fix the problems with the ACA.

The first attempt by Congress to “repeal and replace” the ACA was a big failure, but the individual mandate is now repealed as part of the “Tax Cuts and Jobs Act.” Various members are now working on compromise legislation that addresses subsidies to obtain insurance and expanding health savings accounts (among other issues), but the more meaningful changes could come from regulatory efforts underway at the Departments of Labor and Health and Human Services, where they are currently looking at how administrative actions can boost competition. For example, federal agencies have been asked to develop rules to bring “association health plans” to market, which would allow SMBs to pool as a group and negotiate for better prices.

The bottom line is that SMBs can expect big changes in healthcare. These changes will largely center on how entrepreneurs, innovation, and technology can disrupt the healthcare delivery marketplace to make coverage and services more affordable, transparent, and responsive to consumers.

SBA’s Office of Advocacy and Elevating the Voice of Small Business

The Office of Advocacy is an independent office within the Small Business Administration (SBA) that serves as a regulatory watchdog for small businesses. The Office of Advocacy ensures federal agencies follow the law with respect to what they are required to do to protect small businesses from excessive regulation. A Chief Counsel for Advocacy heads the office and is appointed by the President.

For the past year, the Chief Counsel for Advocacy position has remained vacant, but SMBs can expect a new Chief Counsel this year. This office is a very powerful one for SMBs and can hold federal agencies accountable for ignoring the concerns of small businesses in the regulatory process, or not following the law. Along with the regulatory changes and legislation mentioned above, this office—and therefore the Chief Counsel—will become even more powerful in 2018.

Currently, the Office of Advocacy is doing great work in helping the Administration implement its aggressive regulatory reform agenda. The office has hosted many roundtables around the country to obtain ideas and feedback from SMB owners about how to improve the regulatory process and identify rules and regulations that need to be repealed, updated or streamlined as required under the President’s executive order on regulation. With a new Chief Counsel in place, the Office of Advocacy’s effectiveness can increase further. David Tyron, who has strong support from the SMB community, has been nominated as the new Chief Counsel. The Senate Committee on Small Business and Entrepreneurship will hold his confirmation hearing sometime in January.

For more than a decade, burdensome government regulation has been a top concern SMBs. Regulation policy has made a significant and positive shift over the past year, and that will continue into 2018. How regulation impacts entrepreneurship and the growth of SMBs will be a key priority for Congress and the Administration in the coming year, and that is very good news for our nation’s entrepreneurs.

For the latest SMB news and insights from Karen Kerrigan, join our LinkedIn group, Ask the SMB Experts. The Ask the SMB Experts group is a forum for growing businesses to come together with industry experts to discuss key issues, trends and more.

 

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