Health care's cost to business

Monday, May 17, 2010

Small businesses are -- quite literally -- the lifeblood of our economy. They represent 99 percent of American businesses and employ millions of workers. Our economy's recovery depends a great deal on healthy small businesses and a friendly fiscal climate. Unfortunately, a storm is brewing for our nation's small businesses.

After nearly a year of political wrangling -- and despite bipartisan opposition -- Congress passed and President Obama signed into law the largest government takeover of health care in our nation's history. This bill is already having a major impact on nearly every industry throughout our economy as businesses react to the uncertainty created by the law.

I want to make sure small business owners have the information they need on what the new health care law means for them. Here are some effects of the health care law as it pertains to small businesses (further information is available on my website at

* No later than 2014, states must establish Small Business Health Options Programs (SHOPs), which will enable small businesses to pool their resources to buy insurance;

* Until SHOPs are established, businesses with 10 or fewer full-time employees with average wages of less than $25,000 will be eligible for a 35 percent tax credit toward employer provided health insurance. Firms with up to 25 workers earning an average up to $50,000 a year will receive a portion of the credit, while businesses with more than 25 workers will receive no credit;

* Those tax credits will remain steady, covering up to 50 percent of costs for the first two years any company buys insurance via state exchanges;

* Beginning in 2014, firms with 50 or more employees must offer health care to employees or pay penalties of up to $2,000 per employee for all but the first 30 workers if just one employee claims federal assistance in buying health insurance.

Yes, this in confusing. Worse, though, the tax credits will actually do little to help small businesses. Employers with more employees or with higher average wages will not be eligible for any credit. The self-employed, which comprise more than two-thirds of small businesses, are also ineligible. In other words, growing your business comes with penalties.

In addition the credits are only available for six years, further complicating long-term budgeting efforts for small businesses striving to provide health insurance to their employees.

Some of the nation's largest employers such as AT&T, Verizon, Deere, and Caterpillar are already seeing impacts on their bottom line. These companies currently offer health benefits to more than 2.3 million employees, retirees, and dependents. Caterpillar, which has been forced to reduce its projected earnings by $100 million, would cut its health care expenses by more than 70 percent if it chose to pay the penalty levied by the law rather than provide health insurance.

Additionally, just last month the Obama Administration's own Medicare actuaries warned 16 million Americans could lose employer-provided health insurance and the non-partisan Congressional Budget Office (CBO) estimates 9 million Americans will lose employer-provided health insurance because of the new law. This concern is precisely what makes the legislation a government takeover, as penalties encourage employers to force employees into government-run insurance.

While I support ensuring Americans have access to quality and affordable health insurance, it is important we uphold what works in our health care system. Nebraskans deserve a common sense, step-by-step approach to reform which lowers costs for families and small businesses and increases access to affordable, high-quality care.

Instead of a government takeover which increases taxes and spending, Congress should work together in a fiscally disciplined, bipartisan manner to ensure fair competition in the insurance market, update provider payments, remove barriers to access for individuals with preexisting conditions, and seek cost savings through malpractice reform.

We need to take an honest look at how much this legislation is going to cost American taxpayers. Small businesses -- not the federal government -- are the engine of job creation. The uncertainty created by this bill -- coupled with the massive tax increases and spending levels -- could very well ham-string our economy just as it begins it recovery.

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