Small businesses have the highest hopes for health reform, but they'd be big losers under the bills Con gress is debating.
For more than 20 years, small-business owners have listed health costs as their No. 1 concern. But leading "reform" bills would make things worse — ballooning expenses for firms that now offer insurance and slamming companies that can't afford the benefit.
The 1,990-page bill the House leadership unveiled Thursday would impose a dizzying barrage of new regulations on employers, and force them to either provide government-specified health insurance or pay a penalty of up to 8 percent of their payroll.
Even firms that now provide health benefits get slammed — since that coverage may not meet the government's definition of "acceptable."
For example, the bill requires employers to pay at least 72.5 percent of insurance premiums for an individual and 65 percent for families. Data from a 2009 Kaiser Family Foundation survey suggest that at least 30 percent of firms with fewer than 200 employees that now offer insurance would fail the test for family coverage, and about 20 percent would fail for individual coverage.
In other words, small businesses would have to pay more for health insurance than they do now — as well as comply with hefty new record-keeping requirements and audits by federal agents.
The Congressional Budget Office estimates that businesses will be hit with tax penalties totaling $135 billion over six years for noncompliance with the mandate. These would surely fall disproportionately on small businesses.
President Obama tried to court small business owners with a White House event timed to coincide with the release of the bill by House Speaker Nancy Pelosi. But few were swayed by the rhetoric.
The head of the National Federation of Independent Business, Dan Danner, said the reform bill's huge cost "will ultimately come out of small business owners' pockets and prohibit them from growing, investing in their business and hiring new employees."
WellPoint, a national health-insurance company, mined its own actuarial data to model ObamaCare in the 14 states where it runs Blue Cross plans. In all 14, it found that the House bill would drive up premiums for small businesses and individuals. Young and healthy consumers would see the largest hikes, with premiums more than tripling in some states.
The bill offers a few subsidies to help small businesses pay for insurance. But the credit would cover only half the cost — and only if businesses agree to comply with a list of government demands on coverage requirements.
In any case, the subsidy is gradually reduced for businesses that employ more than 25 employees or pay average wages above $20,000 a year. And it only lasts two years — after that, the business owner is on the hook for the full cost of the expensive coverage.
The pain continues: The bill would also subject businesses and employees to a bigger, hidden tax — a shifting of costs from public to private payers.
The legislation would expand Medicaid — the joint federal/state program designed to insure low-income Americans — to cover another 15 million people. But Medicaid payments to doctors and hospitals are well below market rates — and often below their costs of providing care.
A study by the independent actuarial firm Milliman Inc. concluded that families with employer-based health insurance already pay $1,788 a year in hidden taxes to compensate for underpayments by government programs. That figure will plainly grow under the House bill.
For a final blow, the bill imposes surcharges on high-income individuals that will certainly hit many small business owners — who pay business taxes through their personal-income tax forms.
There's little hope small businesses would fare better in the Senate bill: The mandates, taxes, penalties and "gotcha" subsidies all are expected to be part of the bill that Majority Leader Harry Reid is creating from two committee-passed measures.
This isn't the kind of change that small businesses or our economy need.
Grace-Marie Turner is president of the Galen Institute, a nonprofit research organization focusing on health policy.
Published in the New York Post, November 2, 2009