The US Supreme Court calls it a tax. The Obama administration says it’s a penalty. In Massachusetts, where health-care mandates have been in effect for six years, they call the money a person pays for not having health insurance a “tax penalty." As far as small-business owners like Diane Giblin are concerned, it doesn’t make a difference one way or another.

“To me it’s the same no matter what you want to call it. It’s just another way to get into my pocket,” says Ms. Giblin, co-owner of a nine-employee metal fabrication company located just south of Boston. “Whether it’s a tax or a penalty, it’s the cost that you have to pay, it’s the money you to have to pay out."

But with the Supreme Court's historic ruling last week upholding the federal health-care reform law, the Massachusetts program faces increased scrutiny for how its plan, especially the mandate for small businesses, has played out in practice.

The upside of the Bay State's pioneering reform is clear: The state now has the country’s highest rate of people with health insurance, due in no small part to the requirement that businesses over a certain size help provide it. The downside is less clear: the longer-term impact on business hiring and employment.

Under the 2006 law, Massachusetts businesses with more than 11 employees or their equivalent must offer a “fair and reasonable contribution” toward coverage or pay the state a “Fair Share Assessment” of $295 per full-time employee. The law also requires businesses to help employees pay for premiums using pretax dollars.

Under the federal law, by contrast, businesses with more than 50 employees will face penalties (called a “shared responsibility payment”) equal to $2,000 per full-time employee, with some exclusions. Tax credits are intended to help smaller businesses get coverage for workers.

Almost 79 percent of nonelderly insured Massachusetts residents now receive health insurance through their employers. In 2010, under the most recent data, Massachusetts had about 188,000 employers, 22,324 of which had 11 or more full-time equivalent employees and were potentially subject to the tax penalty, according to the state Division of Health Care Finance and Policy. Of that figure, 1,017 employers faced penalties, with restaurants making up the vast majority. Between 2006 and 2010, the penalties brought in an average of $15.7 million per year to the state, which helped offset costs for the entire law.

Businesses that rely on part-time or seasonal workers have reported the most problems in trying to comply. In the Cape Cod town of Wellfleet, where the local economy is tied to summer tourism, John Vincent Jr. says he’s struggled to keep his drive-in movie theater, mini-golf, and snack bar business in compliance.

Of the 50 people on payroll, the majority are college- or high-school-aged students doing summer work, he says. He also has four year-round employees, whose health benefits are paid 100 percent. That is down from 10 year-round employees a decade ago, a drop he blames on rising health-care costs, including double-digit premium increases, he says.

“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.”

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.”