Keith Girard
All Business.com
With a vote nearing on the historic health reform legislation, the Obama administration has gone into overdrive in its effort to reach out to small businesses. It wants to assure them that the proposed reforms will not only lower costs, but will allow them to be more competitive in the marketplace.
The task, however, has been daunting. The National Federation of Independent Business last week called the Senate bill, in particular, “disastrous” for small businesses because of “new taxes, the creation of new mandates, and the establishment of new entitlement programs.”
Small businesses have been a flash point in the current debate because they make up roughly 40 percent of the nation’s private labor force, yet have fared the worst under the current system. Recent studies indicate that small businesses are likely to see their premiums rise 15 percent in the coming year, double the rate of last year’s increase.
To help shed some light on the issue, we asked the administration to make its best case for the reform measures and to apply them to real-life case studies provided to AllBusiness.com by small business owners.
We also asked small business owners to submit individual questions that addressed their particular concerns. Then, we asked Nancy-Ann DeParle, director of the president’s office of health reform, to address these concerns. In an exclusive interview last week she made the administration’s case.
“We know that small businesses are worried, and they have every reason to be,” she said. “The status quo when it comes to health insurance is not working for small business.
“About one quarter of the uninsured, around 11 million people, are employed at firms with fewer than 25 workers,” she noted. “The number of firms offering insurance is declining, and those that do offer insurance pay about 20 percent more than large firms.”
One of the goals of reform, she said, is to lower costs for small firms. One of the main ways the legislation will do that is through the proposed insurance exchange, which will pool together small firms and increase their ability to negotiate better rates and lower administrative costs.
She added that the estimates she has seen show that some small businesses will be able to save as much as 25 percent on premiums when the bill is fully phased in.
“Most small businesses would be exempt from any requirement that they participate in this, because of size and relatively small payrolls,” she continued. “But those that do, we think should get lower costs; we think they will have more access to more choices and will have access to tax credits to help them afford it.”
Small business owners have been particularly concerned about how the reforms would affect their businesses. So, AllBusiness.com asked firms to submit profiles of their businesses and outline their experience with health insurance.
DeParle addressed two of these case studies directly in the interview, and will post the administration’s response to others on their Web site, which can be found here. AllBusiness.com will also post the information on its Web site.
Helen Dean is one of the cases. She owns a company called Toy Safari in Alameda, Calif., that has five full-time equivalent employees with salaries that average around $20,000 a year. She currently provides health insurance, which costs about $350 a month per employee. Her rates have gone up, on average, 7 percent per year, well ahead of inflation.
She has some workers who are over age 50, which is adding to her health insurance bill. She said that she has avoided hiring people because they would have needed health insurance.
“That’s something we really see a lot,” said DeParle. “There are small businesses out there that could grow, that have good ideas, or [there are] people who would like to start small businesses and they can’t just because of the cost of health insurance.”
First, DeParle said, under the new plan, Dean would have a tax credit to help her pay for insurance, although she wouldn’t be required to offer insurance because of the size of her firm. In the House bill, the credit would cover up to 50 percent of the cost. The Senate tax credit is less initially, but also would cover up to 50 percent once it is fully phased in after 2013.
Both the House and Senate bills would prevent insurance companies from charging higher rates based on health status, and limit the premium variation based on age. Dean could also get lower rates by purchasing insurance through the exchange with other small businesses, she said.
Finally, it should help her be more competitive in hiring workers. “She mentioned that high health insurance costs had prevented her from hiring new workers. Under reform, people will have access to high-quality, affordable coverage through the exchange, meaning that she’ll compete on a level playing field with other firms that offer benefits and attract and retain top, talented workers,” DeParle said.
In addition to preparing case studies, AllBusiness.com also solicited individual questions from business owners. Almost 100 business owners responded, and their concerns ranged from the cost of the overall program to how it would affect such programs as Medicare and Medicaid, and the quality of health care overall.
Steve Benish, of Magic Car Wash in Sheboygan, Wis., asked a question that was representative of a number of small business owners: What is this going to cost to me?
“I own a business with 16 employees, but with sales less than $500,000 a year, am I going to be required to purchase health care for my employees, which I cannot afford, and will I be penalized if I don’t?” he asked.
“For most small businesses, and I believe his certainly would qualify, there won’t be any employer responsibility or requirement,” said DeParle. “It’s really only when you get to a larger payroll and larger number of employees [that you will be required to offer a health plan.]”
Raju Jairam, of MBI Consulting in Fort Collins, Colo., asked: “I’m currently paying premiums for my health insurance. Will the health care reform increase the premiums I’m paying, and will my coverage increase or decrease?”
“First, if you have a health insurance plan that you think works for you, under these bills, it’s going to be what we call grandfathered, meaning that you can keep it,” DeParle said.
“The only change should be that over time your cost should be lowered as we do some of the delivery system reforms.
“The other good thing that just can’t be overemphasized is, let’s say you decided ‘I’m going to go start a small business,’ or you were laid off from your job,” she continued. “After reform, you will be able to go purchase insurance in the exchange and it will be more affordable to you. If you are low income, you’ll have access to subsidies.
“It will enable you to have that peace of mind,” she said. “Pretty much anybody over the age of 30 in this country right now, if you try to go into the individual market, you could have a good chance of being locked out, or find it difficult to purchase because of a pre-existing condition. This has happened in my family and may have happened in yours.
“That’s a benefit of this reform,” she said. “If you wanted to change, if you wanted to start a small business, you will be able to do that.”
Friday, December 4, 2009
White House Makes Its Case for Health Reform to Small Businesses
Thursday, December 3, 2009
Health care reform would mean more costs for businesses
By Danielle Ulman
Business Writer
Daily Record - Baltimore
Kenneth R. Huber of PSA Insurance & Financial Services says there isn’t anything in either the House or Senate version of the health care reform bill that would ‘meaningfully improve care.’ Health insurance requirements could take a radical turn if a health care reform bill ever lands on President Barack Obama’s desk, and that could mean costly changes for businesses.
The House and Senate versions of the bill vary in several key areas, but both call for some sort of employer mandate, requiring certain business owners to provide health insurance to full-time employees, and would require individuals to have health insurance. Businesses and individuals that don’t follow the rules would pay fines for not having coverage.
“For many, many businesses, the employer mandate is going to mean new costs on the business, whether they take the fine or comply,” said Kenneth R. Huber, senior vice president of the employee benefit group for PSA Insurance & Financial Services in Hunt Valley.
“I look at the economy, and a lot of businesses have already trimmed their expenses, including employees. … They’re going to look at a new cost the same way all employers look at a new cost. They’re going to have to figure out how to deal with it,” said Huber, who advises small to medium-sized businesses.
Under the House bill, which passed in November, companies with annual payrolls of $500,000 or more would be required to offer employees health care coverage. Sanctions would begin at 2 percent of payroll expenses and ramp up to 8 percent if the business has a payroll of $750,000 or more.
Under the Senate bill, which has not been debated yet, employers would not have to provide coverage. However, if any employee received government assistance to buy an insurance plan, the company would have to pay a $750 penalty for each of its employees. Companies with fewer than 50 employees would be exempt.
Out of more than 119,000 businesses in Maryland, 74 percent have fewer than 50 full-time employees. But only 44 percent of those businesses offered health benefits in 2008, according to the Department of Health and Human Services.
About 56,000 small businesses in Maryland could qualify for tax credits of up to 50 percent of a health insurance premium under health reform. Reform would expand on Maryland’s Health Insurance Partnership, which gives businesses with two to nine full-time employees the same subsidy if they have not offered insurance in the last year and their employees make less than $50,000 on average. Under reform, a business that employs up to 25 people, with average salaries of $40,000, would qualify for credits.
Reform would also provide coverage for people with pre-existing conditions. But the small-group plans offered in Maryland — for companies with 2 to 50 employees — already do that.
“Our concern is that Maryland already imposes more mandates on the small-group insurance,” said Kathleen Snyder, president and CEO of the Maryland Chamber of Commerce, which opposes the House health care bill.
“We’re concerned that Maryland will come back and add on to a very rich federal government plan, which will add up the costs to insurers [and] to employers,” she said.
Vincent DeMarco, president of the Maryland Citizens’ Health Initiative, said he is hopeful that health care reform will become a reality. His group has pushed for universal health care in Maryland through a 2 percent payroll tax on businesses.
“We would like to do our proposal the way the House did, which is to require all businesses provide health care and charge them an assessment if they don’t,” he said.
“If something like that passes, that would make it unnecessary for us to do many of the things we were going to do,” DeMarco said. “We’re ready to adapt our proposal to theirs to finish the job here in Maryland.”
He said that requiring all businesses to provide health care would decrease the hidden costs in premiums that cover the uninsured. But both Huber and Snyder said they are unsure if health care reform would actually bring costs down.
“At the end of the day, both of these bills are primarily health insurance reforms and expanding coverage, and there isn’t a lot that I believe will meaningfully have any impact on bending the cost curve,” Huber said. “Nor is there anything in either of these bills that will meaningfully improve care.”
