Health Care Costs Surface in Economic Stimulus Debate

The small business community is leveraging its voice in the economic stimulus debate to focus on an issue close to its heart -- health care reform.

The Entrepreneurs' Organization recently surveyed its 7,000 members and found that more than 70 percent of its U.S.-based entrepreneurs were concerned about the rising cost of providing health care in 2009. Group members, who average 39 years old join by invitation and have a company that brings in about $14.4 million in revenue.

"Health care and access to credit are issues that have been on the radar screen for our members for years," said EO Global Board of Directors Chairman Dave Galbenski, adding that in an economic recession it's not surprising to see health care at the top of the list because it's such a "key cost" for businesses.

With more than 28 million uninsured Americans working for small businesses, according to the National Federation of Independent Business, access to affordable health care is a priority for small business owners. The group said that health care premiums for small firms are on average 18 percent higher than those of large businesses, curbing small businesses' ability to invest and grow.

The group conducted business simulations to measure the effects of a hypothetical federal mandate requiring employers to offer private health insurance to all employees starting in 2009, and to finance a minimum of 50 percent of the cost. The group found that of the more than 1.6 million jobs lost between 2009 and 2013, small businesses would account for more than 1 million or 66 percent of all jobs lost.

The House Small Business Committee recently held a hearing (video) on health care reform where Chairwoman Nydia Velazquez (D-N.Y.) reintroduced the CHOICE Act. The measure would allow businesses to obtain coverage at negotiated bulk rates through purchasing pools. It also would allow small businesses that offer health insurance a refundable tax credit of 65 percent.

The committee said that because smaller firms generally bear high administrative costs and higher premiums, only 36 percent of enterprises with 10 or fewer employees sponsor health insurance while nearly all large firms offer it to employees.

Velázquez said that addressing health care will be necessary for the nation to enjoy a full economic recovery.

Michael Beene, a senior health advisor for the National Association for the Self-Employed, told the House committee that micro-businesses are spending a median of 5.5 percent of their total sales on health insurance benefits. That number has increased by nearly half (48.6 percent) since 2005.

"The escalation of health costs is most strongly felt by solo practitioners, who are spending more of their total sales on health insurance compared to three years ago," he told lawmakers. "With such a large percentage of revenues going to health coverage, we can see why this expenditure is one of the first to be decreased or cut when business owners are faced with hard economic times."

Currently, the self-employed can't fully deduct health insurance costs. Unlike employees and a business owner that can pay for health care premiums with pre-tax dollars, a sole proprietor can't. The self-employed business owners experience the 15.3 percent self-employment tax on the premiums. The NASE suggests that "removing this inequity would be a significant economic stimulus for the self-employed." It also supports health tax credits.

The Small Business and Entrepreneurship Council released last week a health care policy cost index (pdf), ranking states according to measures such as mandated benefits on insurers and tax deductibility for health savings accounts.

The best states in terms of state health care policies, according to the council, are Idaho, Utah, Iowa, Michigan and Ohio. The worst are Vermont, Connecticut, Maine, Washington and Massachusetts.

By Sharon McLoone |  February 10, 2009; 11:15 AM ET Health Care , Regulation Legislation
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When are our government leaders going to actually do something about the issues of our economy?
Rather than spending our hard earned tax dollars for discussions, debates, and studies that only reflect knowledge that we, as the tax paying backbone of society, could and in most cases already have told them?
Why don't they just get down to business and legislate some real economic stimulus for our economy, before more small businesses have to fail due to the lack of accountability of our government officials!!!
Does anyone out there agree???

Posted by: completemc1 | February 11, 2009 10:26 AM

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