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Sacramento Bee Ignores Small Business Facts on Health Care

Reporting on health care in the December 15th Sacramento Bee Bobby Caina Calvan writes:

But the vast majority of small businesses would benefit from the proposals, according to health advocates.

Most small businesses would be exempt from new payroll taxes and other potential penalties levied against larger firms that choose not to offer health coverage to their employees. At the same time, these small businesses could benefit from subsidies and the new exchange by allowing their uninsured workers to buy insurance from the exchange.

But as Heritage scholar John Ligon details, the subsidies and credits in the Senate Majority Leader Harry Reid’s (D-NV) are largely worthless to most small businesses:

Small companies, especially those with 10 or fewer workers, do not need to offer health insurance as a benefit for employment. These companies have little overall incentive to provide costly health insurance coverage as their labor force mix tends to weigh heavily on low-wage, low-skilled workers—along with a relatively high-degree turnover among workers since a lot are temporary or part-time workers. To the extent that any small company relies on seasonal workers in particular the tax credits will remain unhelpful (Sec. 1421(d)(5)(A)and(B)).

While Reid’s bill attempts to respond to legitimate concerns for small businesses—and small business owners—the impact is highly uncertain and provisions such as the “small business tax credits” will likely remain ineffective at helping small businesses. The exclusion of “non-elective contributions”, or contributions of an employer relating to a salary reduction, will make it even more difficult for small businesses to absorb the additional cost of offering coverage to workers—especially if it cannot pass the burden along to workers without the fear of facing penalties (Sec. 1421(e)(3)). Thus, if health insurance costs continue to increase, as many expect will happen, then these changes will remain deleterious for small employers wanting to offer coverage to workers as well as those that continue to offer coverage.

Calvin does quote an analyst from the “Small Business Majority” in favor of the Reid bill, but doesn’t report on who created the group or why it is was created. In contrast, the National Federation of Independent Businesses, which has been the leading small business association representing small and independent businesses since 1983 says the Reid bill will hurt small businesses:

Small business can’t support a proposal that does not address their No. 1 problem: the unsustainable cost of healthcare. With unemployment at a 26-year high and small business owners struggling to simply keep their doors open, this kind of reform is not what we need to encourage small businesses to thrive.

We oppose the Patient Protection and Affordable Care Act due to the amount of new taxes, the creation of new mandates, and the establishment of new entitlement programs. There is no doubt all these burdens will be paid for on the backs of small business. It’s clear to us that, at the end of the day, the costs to small business more than outweigh the benefits they may have realized.