When it comes to finding quality, affordable health insurance, few have it worse than small-business owners and their workers shopping for coverage on the open market. They are charged the most per person, have the least amount of choice and, as a result, are some of the most likely to be uninsured.
Lawmakers know this, which is why many of the key elements in the health care bill just passed by the House — and being considered in the Senate — are aimed squarely at small business. A wide array of economists and health-policy experts say insurance reforms (like prohibiting insurers from denying coverage because of pre-existing conditions), a new transparent marketplace to shop for coverage and a government-run insurance plan all have the potential to help small business. So why are the powerful lobbyists who represent this crucial sector of the economy, such as the Chamber of Commerce and the National Federation of Independent Business (NFIB), doing everything they can to scuttle the House bill?
After all, it's not as if these advocates believe the status quo is viable. "If we don't get something done, sooner or later the whole temple is going to come crumbling down," says James Gelfand, senior manager of health policy for the Chamber. Some 70% of the nation's estimated 50 million uninsured are full-time workers or their dependents, many of whom work for small businesses. Just 39% of workers in firms with three to 24 staff are covered by job-sponsored insurance, down from 50% in 1999. Workers at companies with fewer than 200 employees (that offer coverage) pay an average of $4,204 out of pocket per year for family health insurance, compared with $3,182 for workers at firms above the 200-employee threshold.
The reason small businesses have it so bad in the current system is that they have tiny risk pools, which means their premiums are higher and less stable, and their administrative costs are crushing. One central provision of the House bill could greatly mitigate these problems, by allowing small businesses — along with uninsured individuals — to purchase health insurance in a newly established national exchange. This marketplace would pool risk, streamline administrative costs, eliminate the need for expensive insurance brokers and allow small businesses to purchase coverage through a government-run insurance plan, also known as the public option. The exchange and public option would be operational beginning in 2013 and would initially be open only to individuals and businesses with fewer than 25 workers; by 2015, businesses of up to 100 employees would be able to shop there.
Business groups like the Chamber and the NFIB vehemently oppose the public option. The Chamber says it would pay below-cost reimbursement rates, leading doctors and hospitals to charge private insurers (and the employers who purchase coverage from them) more to make up the difference. But even if that were true — and there are many observers who say this fear is overblown — it's not clear that small-business owners would be the ones to suffer.
On an individual basis, small-business owners shopping for coverage would likely want the cheapest acceptable insurance available, and that could well turn out to be the public option. If cost-shifting occurred, large employers not able to shop in the exchange or buy into the public option would be the ones adversely affected. The Chamber, though, also represents those businesses, which already offer coverage to most workers and are chiefly concerned about cost-shifting and new rules mandating minimum standards for coverage. "We have to balance the interests of both," says the Chamber's Gelfand.
The NFIB, which represents mostly businesses with 10 or fewer employees and annual revenues of less than $500,000, says the public option "is an easy way out for legislators who decided to simply grow the size of government." But when asked to elaborate on why members oppose the public option, Amanda Austin, the organization's director of federal public policy, offered a fairly abstract answer: "Their fear is, 'We don't like the insurance industry, but we really don't like the government.' Their relationship with the government up until now has not been overly friendly."
Even more offensive to the Chamber and the NFIB than the public option is the House bill's "employer mandate," which would require businesses to not only provide coverage to workers, but also shoulder substantial portions of the premiums or pay a penalty to the government. The NFIB warns that an employer mandate will destroy small-business growth and lead to the loss of as many as 1 million small-business jobs. But in making such dire claims, they appear to be ignoring a crucial detail: under the House bill, the vast majority of small businesses — those with annual payrolls less than $500,000, meaning more than 80% of all companies — would be exempt from these new rules.
Not surprisingly, the NFIB and the Chamber both prefer the bill drafted by the Senate Finance Committee, which contains no employer mandate and would only penalize companies with employees who qualify for government subsidies to buy insurance. (Businesses with 50 or fewer workers would be exempt.) But this strategy could actually be worse for the economy. In a July briefing paper, the Congressional Budget Office said this "free rider" approach could lead to more job losses than an employer mandate, which spreads smaller penalties out among a wider variety of companies instead of targeting only those that employ low-wage workers.
So is there anything small-business groups like about reform proposals? Yes, actually — quite a bit. They support insurance-market reform and like the idea of an exchange to pool risk. They want a strong individual (as opposed to employer) mandate and changes to the fee-for-service system that is driving medical inflation. In other words, what small-business advocacy groups really want is a combination of elements that doesn't currently exist in any of the congressional proposals on the table. But if the complicated health-reform process has already proved one thing, it's that nobody, not even the powerful small-business lobby, is going to get everything it wants in the final product.