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The Cost of Health Care Reform

How the result could have a significant outcome for small business.

By Carl Kleimann

The Obama administration and Congress are focused on the American public’s access to high-quality, affordable health care. With rapidly-rising health care costs, a reform debate rages on with various proposals that will overhaul our nation’s health care system. While still in the early stages, the result of the debate could change the way small businesses provide health care coverage to employees.

What’s being proposed?
The “public plan” option is the first and most controversial issue in the debate. So far proposals include a program entirely controlled by the government; a program created by the government, but administered by the private sector; and a program allowing each state to design its own public insurance plan.

Many proponents of a public plan including Congress and business advocacy groups believe that this plan, which competes with private plans, would force insurance companies to improve efficiency, thereby reducing costs.

Opponents of the public plan believe that it will be harder for private insurers to compete, which will undermine private insurance and force private insurers to pay higher medical costs to make up for lower benefits that providers would receive from a government-run plan. They say that the result will be that all Americans would eventually end up in a single payer, government-controlled health care system.

Who will be responsible?
Another big question involves mandates or “pay or play.” This option requires the government to decide whether individuals or employers will be required to buy health insurance, or some combination of the two. The government will also determine what coverage is required.

Businesses that fail to provide coverage would be subject to taxation under an employer mandate. The tax would reimburse the government for coverage, or subsidized coverage, provided to low- and middle-income Americans. Some advocates on Capitol Hill say that businesses could be required to pay 80 percent of premiums for individual coverage and 65 percent of premiums for family coverage to avoid the tax. The government may also provide tax credits to small businesses to help pay for coverage.

How will small businesses be defined?
Another debate is whether to exempt certain businesses from the mandate based on size or revenue. One proposal would exempt businesses with less than $500,000 in annual revenue.

Massachusetts, the first state to implement a statewide health care mandate, currently requires employers with 11 or more employees to provide health insurance. Most of the federal proposals place that number slightly higher.

Such exemptions could have unintended consequences depending on how “small business” is defined. An exemption that favors firms with low-wage employees could ultimately suppress wages. An exemption that favors businesses with few employees could stifle growth. Either way business strategies could revolve around such exemptions.

The Debate
  • Public insurance plan - will drive down private insurance plan costs for business owners, allowing them to increase wages and invest in growth.
  • Mandates - will result in increased liability and compliance. Over time, business owners will be required to bear more health care costs for employees.
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How will businesses benefit?
Small Business Majority, a nonprofit advocacy group, predicted that without health care reform, costs for small businesses will more than double in the next nine years. Accordingly, any plan to expand coverage must first be focused on controlling health care costs thereby lowering insurance premiums.

Whatever side of the debate you’re on, one thing is clear: Any of the current proposals will have a significant impact on small businesses and could reshape the way health care is delivered to employees.

To learn more about the health care reform debate::

www.odysseyonesource.com/hrd

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