Without Cost Control, Health Care Reform Will Hurt Small Business
The historic healthcare-reform legislation that passed yesterday offers small business a risky trade. In exchange for being forced to cover their employees companies will receive tax breaks and collective bargaining power. But the bill does little to control costs, which could leave small business trapped between skyrocketing premiums and stiff fines for uncovered workers.
The good news is that the subsidies will kick in before the penalties. If you're a business owner with fewer than 50 workers, you aren't initially required to offer insurance, although the government will help out if you do. Firms with 25 or fewer employees and an average wage of $40,000 or less will be eligible for a tax credit that covers between 35-50% of the premium as early as this year.
By 2014, however, all companies with 50 or more employees will be required to provide insurance. The government hopes that this will be accomplished best through Small Business Health Option Programs, called SHOP pools. Any company with 100 employees or less can enter, allowing firms to band together and increase their purchasing power. The CBO predicts this will help them cut their premiums by 1-4%. Firms that enter this pool will also have access to tax credits.
The problem is that premiums are likely to rise by a lot more than 4% in the next few years, as insurance companies rush to protect their bottom line. This is the unfortunate consequence of a health care bill that achieves the moral imperative of near universal coverage but compromises with special interests -- hospitals, pharma and the insurance industry -- on issues that would control cost.
Data from the Kaiser Family Foundation shows that premiums for families in employer sponsored health care have risen 97% between 2000-2008, three times faster than wages and five time the rate of inflation. Experts expect this trend to continue, or even escalate in the short term.
The government plans to expand federal subsidies for insurance and enlarge the rolls of Medicare. But employers can't rely on that to help them cover their costs. Instead, they will be slapped with a fine for every employee who uses government aid to pay for insurance, a penalty ranging between $750-3,000. Asking small business to shoulder this burden is a poor substitute for attacking the source of this national disease.
Image from Flickr user Karen Apricot
