NASE on Micro-Business

Health Care Reform Run Amok [Commentary]

Posted on: June 16, 2009

My days, and nights, have recently been spent reading through the 615-page draft version of the health reform bill released by Senator Edward Kennedy (D-Mass.) and the Senate Committee on Health, Education, Labor & Pensions.  Talk about bedtime reading.   It is a monster of a bill, known as the Affordable Health Choices Act, which will certainly change the way our health care system works today.

According to Sen. Kennedy and his colleagues on the committee, health coverage will be a requirement rather than a luxury.  All Americans would be required to purchase a “qualified” health insurance plan.  The government will determine what plans are deemed “qualified”.  You will be responsible for reporting to the government that you have health insurance.  Should you go without coverage, you will have to pay a tax.  All you employers out there will also be mandated to provide insurance to your workers and if you do not, you will also pay a tax.  There will be a small employer exemption; however a decision has not yet been made on whether it will be based on revenue, payroll or number of employees.  Depending on this exemption, this legislation may push many micro-businesses back into the business of managing health care for their employees.  Only 18% of businesses with ten or less employees are currently providing employer-based health coverage [NASE Study, 2008]. While the majority of small business owners want to assist their workers with affording health coverage, many businesses do not want to administer a health care plan.  For a micro-business owner this is a cumbersome task and one they are not trained to do.

Significant market reforms, both positive and negative, are also included in the bill.  A plus for the self-employed is that the Affordable Health Choices Act would require insurance companies to provide coverage to all regardless of their health status, gender or other factors.   Many self-employed, due to an illness or health problem, are denied insurance or only have available to them high priced or shoddy coverage options.  On the down side is that this legislation will certainly get the government into the health care game.

A new government-run health insurance option will be created, similar to Medicare, which individuals and small businesses could select for coverage.  Additionally, a new Medical Advisory Council (MAC) would be created to determine what are those “qualified” plans mentioned above.  This federal body will determine what type of coverage and the amount of that coverage that must be the minimum included in all health policies.   This may ensure that important preventive screenings are included in all health plans.  However, this also means that business owners and individuals may not have as much choice or flexibility in creating the type of health policy they think is best for them, their business and/or their families.  The determinations of the MAC could have a profound affect on the cost of health plans as well.

On the tax front, there is a tax credit for individuals to help them purchase coverage and a small business tax credit mentioned, though it seems the formula for determining how much of a credit a small business will receive is very confusing.  Disappointingly, the Kennedy bill does not address many of the tax inequities faced by the self-employed.  For example, sole-proprietors will still not receive a business deduction for health insurance and thus, will continue to pay extra taxes that no other business has to pay.

Overall, my biggest concern about the Affordable Health Choices Act and many of the other suggestions out there for health reform is the complexity and additional bureaucracy these reforms will create in our health care system.  Shouldn’t the goal be to make the system easier to access and understand?  One of the best qualities about our legislative process is that there are so many very smart people that are involved with making an idea become a reality.  Yet, when you have been part of the process for so long, or as they say “in the beltway,” you can easily overlook the practicalities of the outside world. Many of the good ideas in health reform are becoming convoluted and many of the bad ideas are starting to look good.  We need these very smart people to think about what it is like to be a small business owner or a self-employed individual out on your own. Most importantly, we need them to remember what my wise grandfather, an entrepreneur himself, often imparts to me:  Keep It Simple, Stupid!

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