Small Business Worried about Health Reform

Small business owners haven’t been buying tickets for the Big O’s Health Reform Express, and it’s easy to see why.

The nascent House legislation requires all employers with payrolls of $500,000 or more to offer health insurance to workers or face a payroll tax of up to 8%.

That’s a tough nut to swallow since the price of insurance premiums doubled between 2000 and 2008 and according to a study by the Council of Economic Advisors, small businesses pay up to 18% more for the same policy than large companies because of their lack of negotiation clout.

This calculus has resulted in a net drop from 68% to 62% in the number of small companies offering health benefits since 2000. And that, in turn, helps explain why a staggering 16.8 million people who work at companies with 100 employees or less are uninsured.

Speaking on this subject in late July, President Obama asserted "this is unsustainable, it's unacceptable, and it's going to change when I sign health insurance reform into law."

Subsequently, the Big O and White House economist Austan Goolsbee set out to convince small business owners that their health-care cost burden will drop once the Express pulls into the station.

Proposed tax credits for businesses offering health coverage will help, they say. And small businesses can negotiate cheaper policies via an insurance exchange proposed in the House bill.

Then there’s that study by the non-profit research concern, Small Business Majority, which estimates that the Express will save small businesses $855 billion in insurance costs over the next decade.

But a payroll tax bump amid the Great Economic Crisis? That’s a non-starter for David Prescott, the CEO of Talon LPE, a Texas-based consultancy. "I agree that health care is broken and something needs to be done, but you can't put the entire debt load on business right now," he told Business Week.

Glenn Laffel MD, PhD, Sr. VP Clinical Affairs