Small Biz Health Care Daily: New York Times, Small Business and Health Care

In its lead editorial on Thursday (August 13) titled “Health Reform and Small Business,” The New York Times concluded: “It makes good sense to us to require small businesses to contribute to solving a problem that mostly affects their own workers. There also seems little doubt that the small business community would be one of the biggest winners from health care reform.”

Raymond J. Keating, chief economist for the Small Business & Entrepreneurship Council, observed:

“The New York Times editorial page makes quite a claim about small businesses becoming ‘one of the biggest winners from health care reform.’ How do they get there? Well, it’s rather unclear from the rest of the editorial. They note one study from ‘a respected health care economist’ at MIT who found that ‘employers would reduce wages to compensate for providing benefits.’ Hmmm.

“And regarding ‘pay or play’ mandates and fines on businesses, the Times noted the following: ‘There is no question that the cost of coverage — which currently averages about $5,000 per individual or $13,000 per family — or paying fines could take a substantial bite out of the profits of some firms, forcing them to accept lower earnings, reduce wages, shed some jobs or raise prices.’

“And this as well: ‘We see no easy way to ease the pain of the minority of firms that will face very substantial new costs.’

“I’m still missing the big win here for small business. The Times tries to offset these points by claiming that government-run insurance exchanges will somehow magically reduce costs, despite the reality that such exchanges would be vehicles for jacking up mandates and regulations, and thereby reducing true competition. And the Times ignores the overall ills to the system from more government involvement – including increased costs and reduced quality of care – which obviously impact small businesses and their employees. In the end, the Times editorial is more wishful thinking, than sound analysis.”

Small Biz Health Care Daily: CEA, Small Business and Health Care

The White House has launched so-called health care “reality check” items on the Internet. One of these “reality checks” features a short video from Christina Romer, chairwoman of the Council of Economic Advisers, addressing how the health care agenda being pushed by the President and leaders in Congress would affect small business. According to Romer, these measures would work to ease “burdens for small firms.” She cites insurance exchanges, tax credits, and that “pay or play” mandates would not impact businesses with less than 25 employees. Romer also asserts that reform will be an improvement over the current system for small business.

Raymond J. Keating, chief economist for the Small Business & Entrepreneurship Council, responded:

“As an economist, Romer has a very difficult job. That is, selling a health care agenda that makes no economic sense whatsoever. Given the third-party payer problem, government’s inability to control costs, the costs that come with mandates and regulation, and the destructiveness of price controls and rationing when government does try to rein in costs, it should be evident that this major effort by the Obama administration and leaders in Congress to inject more government control and funding into health care will not turn out well, including for small businesses.

“As for the specifics noted by Romer, insurance exchanges will not be an opportunity for small businesses to shop around for care – they have that ability now, by the way – but instead will serve as venues for government to regulate and impose mandates. That means fewer real choices and higher costs for small businesses. Any tax credits would be highly targeted, limited, and meaningless for most businesses. And the “pay or play” mandate – demanding that businesses either provide government-approved coverage or pay a tax – will do real damage to countless small and mid-size businesses, and as costs skyrocket, the reach of this mandate will expand, and the tax will rise. Finally, while Romer lays out the cost problems faced by small businesses regarding health care coverage today, she simply assumes that the current reform effort would improve matters. In reality, of course, the one thing we can count on is that when government gets involved, costs will climb even higher.”

Dems Health Care Bill a Bad Deal for Small Business

The health care plan proposed by House Democrats on July 15 would punish small business owners who are already struggling under harsh economic conditions. It will do little to make health insurance more affordable. The content of the bill -- called “America’s Affordable Health Choices Act" -- is not truthfully represented by its title. The $1 trillion-plus plan will accelerate job loss and business closures as the employer mandates and excessive taxes and penalties make it financially unfeasible for many firms to compete.

It’s seems rather extraordinary that House Democrats are moving forward with this scheme. Either they are dreadfully out-of-touch, or just plain contemptuous of small business owners. Many small businesses are struggling to access and keep health insurance on top of juggling other financial pressures. Imposing taxes and a costly mandate, as the Democrat plan proposes, during a period when businesses are already cutting jobs and investment is economically foolish.

The 1,000-plus page Democrat plan includes:

• Employer Mandates: Requires employers to provide insurance or pay a penalty for not doing so. Businesses with more than $500,000 in revenues would pay a penalty of 8% of payroll. There is a graduated penalty for firms falling between $250,000 to $500,000 in revenues with business with less than $250,000 exempt from the mandate. (The graduated rates are 2% of payroll for employers with payrolls above $250,000 to $300,000; 4% for employers with payrolls above $300,000 to $350,000; and 6% for employers with payrolls above $350,000 to $400,000.)

• An individual Mandate: Individuals and the self-employed are required to buy health insurance or pay a financial penalty, which would be 2.5 percent of income.

• Higher Taxes: A surtax would be imposed on higher-income individuals – many of which are small business owners. Individuals earning $280,000 and couples earning $350,000 would get hit with a 1% tax; those making $500,000-$1,000,000 would be taxed 1.5%; and couples earning more than $1 million would pay a 5.4% tax. These tax rates would increase if certain targets are not met.

• Government Health Insurance: A government-run health care plan is established. Such an option would undermine private insurance, diminish choice in the marketplace and ultimately drive insurance rates higher. Small businesses and individuals could be taxed more to keep up with the higher costs associated with non-competitive, government-run health care.

As large, complex and costly as the bill appears, House Democrats plan to begin markup in the Education and Labor Committee as early as July 15. The House Ways and Means Committee plans to begin markup on July 16. House Democrat leaders say they want a bill passed before the August recess and the legislative process will move rapidly.

The rush to pass this bill without allowing a full examination of it consequences is negligent. The economic consequences of this legislation are significant, including its impact on the small business sector and the future of U.S. entrepreneurship. Small business owners certainly want action on reforms that bring them affordable health coverage, but putting the cost burden for financing this government-run system almost exclusively on their backs is unjust.

Karen Kerrigan
President & CEO