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Monday, December 21, 2009

Small Biz Health Care Daily: Senate Bill and Insurance Coverage

There is a great deal to be concerned with in the Senate health care plan being debated. The December 19 CBO estimates on the Senate plan at least touches on some of those issues.

Interestingly, this government health care agenda has been billed as a way to expand coverage, while also declaring that people will not lose their current coverage. In fact, it’s supposed to be about more choice. But when government expands, costs rise and true choices are reduced.

The CBO, for example, reported the following: “Between 8 million and 9 million other people who would be covered by an employment-based plan under current law would not have an offer of such coverage under the proposal. Firms that would choose not to offer coverage as a result of the proposal would tend to be smaller employers and employers that predominantly employ lower-wage workers—people who would be eligible for subsidies through the exchanges—although some workers who would not have employment-based coverage because of the proposal would not be eligible for such subsidies. Whether those changes in coverage would represent the dropping of existing coverage or a lack of new offers of coverage is difficult to determine.”

In the end, lost private-sector coverage and/or choices promise to be substantial due to government driving up the costs of health care services and private insurance coverage.

One means for driving up these costs is mandates. The CBO reported:

“CBO and JCT have determined that the legislation contains private-sector and intergovernmental mandates as defined in the Unfunded Mandates Reform Act. The total cost of mandates imposed on the private sector, as estimated by CBO and JCT, would greatly exceed the threshold established in UMRA for private entities ($139 million in 2009, adjusted annually for inflation)—as was the case for the legislation as originally proposed. The most costly mandates would be the new requirements regarding health insurance coverage that apply to the private sector. The legislation would require individuals to obtain acceptable health insurance coverage, as defined in the legislation. The legislation also would penalize medium-sized and large employers that did not offer health insurance to their employees if any of their workers obtained subsidized coverage through the insurance exchanges. The legislation would impose a number of mandates, including requirements on issuers of health insurance, new standards governing health information, and nutrition labeling requirements… New requirements in the Medicaid program also would result in an increase in state spending.”

While pointing out that such costs will exist, unfortunately, these guess-timates promise to be woefully underestimated. That has long been the case with government estimates of how much major health care programs will cost, and there is no reason to believe it will be any different this time around.

In the end, both tax and regulatory costs will turn out to be much larger than anticipated given government’s central role in this entire health care reform effort.

Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council

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