So, is the new healthcare reform law good or bad for small business?
Overall, I say it is a good thing, but before you skewer me, look at the reasons why:
The first is that almost anything beats the status quo. Having premiums rising by the double-digits every year had become an untenable situation. Small business owners face the yearly choice of how to continue to offer some sort of coverage for their employees, and increasingly the decision has been to cut benefits, cut the plan, increase the amount passed on to the employee, or cut coverage altogether.
That is why a huge swath of “the uninsured” we hear so much about are actually solo business people and folk who work for very small businesses. Consider:
· Less than half of business with 3 to 9 workers even offered their employees any insurance in 2008, and
· 29 percent of small business employees (of businesses with less than 25 people) were uninsured altogether
So when we talk about insuring the uninsured, it is not only the poor we are talking about; in large measure, we are talking about employees of small business.
So for small business, something had to change. But is this the best solution?
No, not by a long shot. I think we can all agree parts of this law stink. It’s incredibly expensive, and the kickbacks and buyoffs were tough to watch; but even then, come-on, we are all grownups here. This is politics after all. To quote Louis in Casablanca¸ no one should be "shocked, shocked! that there is gambling going on" in this establishment.
That said, the good outweighs the bad for small business. Here’s why:
The first, main, and best reason is the creation of the state-by-state run health insurance exchanges. I think we all know by now that a basic reason coverage is so expensive for small business is the shallow pool of people being covered. Not only does insuring, say, 4 people, create no buying power, but it does not allow the insurance company many people with whom to spread the risk.
The insurance exchanges should remedy this. They will be a sort of cooperative where small businesses can band together and get some of the rates and plans bigger companies get. By creating a bigger risk pool, and by joining together to get more buying power, small businesses should be able to get better rates.
What about the mandates to buy insurance, you ask? There is nothing to like there, right? Well, the mandate only applies to employers with 50 or more full-time employees, and most small businesses have less than 50 employees.
But even then, there are incentives for these smaller-than-50 businesses to offer insurance because of the tax credits built into the bill as incentive:
· A tax credit of up to 35% of the cost of the insurance if you have 10 employees or less, and they earn less than $25,000 on average
· A smaller tax credit if you have 25 employees or less and they make $50,000 or less on average
Another benefit is that because these exchanges will be open to individuals, it is expected that employees will be more will open to changing jobs – the so-called “job lock”, where employees don’t leave a job for fear of losing their insurance, should be a thing of the past. Or maybe even better, these employees will be more open to starting their own business as one impediment to doing so – the cost of an individual policy – should hopefully be eased.
But no, this law is far from perfect. It’s expensive and complicated. Will it help? It should. It better!
