House Health Care Bill is a Killer for Small Business - Washington Insider
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House Health Care Bill is a Killer for Small Business

By Christian Klein

Article Date: 12-01-2009
Copyright(C) 2009 Associated Equipment Distributors. All Rights Reserved.

Desperate for real health care reform, the equipment industry is disappointed by Dems’ plan.

While most Americans probably see the health care reform debate as a 2009 phenomenon, AED and many other business groups have been working for health insurance reform for many years.

In survey after survey, equipment distributors have identified legislation to bring down health insurance costs as a top priority for AED’s Government Affairs Program. The reason is simple: Our members want to provide health insurance to employees but double digit annual increases in premiums (not to mention the worst business conditions since the Great Depression) have made that difficult.

For years, AED has been pushing market-based solutions such as legislation to allow companies to pool across state lines and become insurance buying groups (so-called, “association health plans”). Unfortunately, the health care bill unveiled (and since passed) by House Democratic leaders this fall goes the opposite direction and would lead to less competition, not more. A number of aspects of the bill have the equipment industry worried:
  • The employer mandate would punish companies that don’t provide insurance with a punitive “pay or play” tax. Aside from the overly prescriptive tests for employers who provide coverage, the payroll tax penalties would threaten companies regardless of whether they provide insurance. Mandates would be a “one-two punch” borne first by the employer, then by employees through lost jobs and lower wages.
  • The 5.4 percent surtax on wealthy individuals (individuals earning over $500,000 and joint filers over $1 million) would hurt small companies. Seventy-five percent of small businesses are structured as pass-through entities and pay their business taxes at the individual level. By some estimates, more than one-third of small businesses employing 20 to 250 employees would be subject to the tax. Since the tax isn’t indexed for inflation, it will creep downward overtime, gobbling up more and more companies.
  • The government-run “public option” plan would force private insurance companies to compete against the government. AED has fought for decades to keep government out of the private sector (think General Services Administration cooperative purchasing or the Tennessee Valley Authority heavy equipment program). No company can compete with the government’s limitless resources, so the end result would inevitably be a government run, “single payer” system.
  • By limiting the use of health savings accounts and other creative mechanisms, the legislation would take innovative solutions off the table and limit the insurance options available to small companies.
  • And the massive cost of the bill (more than $1 trillion) will place more financial burdens on small companies in the form of more penalties, fees, and taxes.

We’re not trying to erect false barriers to progress. We just think there are better and cheaper ways to make health care affordable and accessible for small businesses and their employees. With that in mind, here are some suggestions for real health insurance reform:
  • Institute insurance market reforms that increase access, expand choice and spur competition for private insurance
  • Create marketplaces that provide greater transparency and more efficient approaches for purchasing insurance
  • Provide equity in tax treatment for the self-employed 
  • Improve affordability and provide for sustainable cost containment by eliminating wasteful spending in the overall health care system
  • Enhance efficiency in the delivery of medical services (e.g., by encouraging electronic medical records)
  • Impose limits on medical malpractice claims

As the health care reform debate moves forward in the Senate, AED’s commitment to the free market and competition will continue to guide our work in this area, as in others. Having a single big insurance company dominate a geographic market is as bad as having a nationwide government run program that drives all private insurance companies out of business. Everyone in the distribution business knows that healthy competition brings down prices and forces companies to be more efficient. If lower prices and greater efficiency are the goal, more competition, not less, is the right prescription for health care reform.
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