What a difference one special election makes. In the wake of Scott Brown’s upset victory in Tuesday's special election to fill the Senate seat vacated by the late Ted Kennedy, all the stories about health care reform this morning involve needles — and not the hypodermic kind. More like how congressional Democrats will have to “thread the needle,” or “find a needle in a haystack” to pass reform now.

And how it will be easier for the proverbial camel to get through the eye of a needle than it will be to pass reform legislation in the Senate, without a Democrat in the second Mass. seat.

So, has the last year or so of our lives spent wringing our hands over health care reform been for nothing? I wonder …

That said, I urge you to keep reading the post below. Guest blogger Bruce Shutan is back, this time reporting back on how reform (needle-like chances and all) may affect small business.

Leave your comments on the chances for reform now that Brown is set to be sworn in as early as the end of the week. Interesting that Brown’s vote may signal the end of universal health care, considering he’s from the only state that actually has universal health care. Kind of ironic, no?

Small business groups at odds over health reform

By Bruce Shutan

The National Federation of Independent Business (NFIB) in Washington, D.C., frets over the impact health care reform legislation will have on its 350,000 members representing 16 million organizations.

But the Small Business Majority (SBM) welcomes such a change for the 6 million employers and nearly 22 million self-employed individuals the Sausalito, Calif.-based group represents.

Amanda Austin, NFIB’s director of federal public policy, is disappointed that “there wasn’t enough attention being paid to more cost-containment and driving down premiums long-term.”

While understanding the importance of subsidizing low-income workers, Austin fears that new legislation would not contain employer premiums at renewal time and that a mandated coverage would come at the expense of recruitment, raises and other HR-related business costs.

Still, there are other considerations. Small business would do “far better” under both the Senate and House bills than the status quo, according to SBM CEO John Arensmeyer. The group’s research found that small businesses would face $2.4 trillion in increased health care costs during the next 10 years without any reform.

Acknowledging that neither piece of legislation is perfect, he believes they’re fiscally responsible in seeking to lower the deficit and points to several areas where there’s substantial improvement. They include insurance reforms, the establishment of an insurance-exchange system that promotes transparency and competition, tax credits that make it easier to buy insurance and cost-containment provisions.

Democratic senators are crowing about how the small-business community stands to benefit from targeted tax relief, an online insurance exchange that makes coverage accessible and lower costs resulting from a ban on discriminatory practices that have allowed insurers to double and triple premiums if just one employee becomes sick.

The legislation creates insurance exchanges known as Small Business Health Options Programs (SHOP) that allow firms with up to 100 employees to band together to spread their financial risk, increase their leverage and enhance their choice of plans and buying power against large insurance firms.

Another key feature involves employer tax credits worth up to 35% of their health care contributions – a number that swells to 50% by 2014 when SHOP exchanges are established.

The Senate has sought to exempt firms with 50 and fewer employees from being fined for not offering coverage and use the exchanges create a marketplace for health insurance benefits that they couldn’t otherwise afford, notes Paul Fronstin, director of the health research program at the Employee Benefit Research Institute in Washington, D.C.

But in the House, he says, the exemption is based on employers with payrolls below $500,000 “and then it’s a sliding scale upward in terms of what percentage of payroll you would basically have to pay if you didn’t play.”

A Kaiser Family Foundation survey found that 46% of firms with three to nine employees offer coverage – a figure that soars to 72% when the head count is between 10 and 24, 87% when it’s 25 to 49 and 95% when it’s 50 to 199. “That’s one of the reasons why you see this exemption at 50,” Fronstin explains.

Chief among NFIB’s gripes: on top of small businesses already are paying 18% more for health insurance than large firms, the corporate reporting requirement would cost them 66% more than big business.

There’s also concern that many employers will exceed the proposed excise tax thresholds, which would be indexed only to the consumer price index plus 1% when health care costs are increasing annually by an average of 7% or 8, while geographic variations, the average age of the workforce and retiree health benefits may drive up those expenses even further.
Arensmeyer describes the proposed exchange as a critical link to providing small businesses with competitively priced plans, preferring a nationalized system under the House bill to the patchwork of state entities under the Senate bill because some regions might lack enough competition.

Other SBM preferences include Senate tax credits, which would take effect this year, whereas the House version would defer them until 2013, and a 2:1 age-banding ratio in the House to help ease premiums for older employees, whereas it’s 3:1 in the Senate.

With regard to this second point, Arensmeyer explains that “a substantial portion of small-business owners and new small-business creation are by people in the 50 to 64 age bracket, people who are retiring and starting second careers, etc.”
Guest blogger Bruce Shutan is a former managing editor of Employee Benefit News and a freelance writer based in Los Angeles.

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