NASE on Micro-Business

Posts Tagged ‘Kristie

From day one the Obama Administration has been touting that they were going to foster a different kind of government. Transparency, participation and communication were going to be front and center. As I work on health care reform however, it is evident that Congress unfortunately didn’t get the memo on this new citizen-friendly, collaborative process.

Recently, I spoke about the micro-business perspective on mandates at a briefing sponsored by the Coalition for Affordable Health Coverage. In my concluding remarks, I highlighted that our recent survey of micro-businesses showed that while they want government involvement in regulating the insurance market, they did not want the federal government to provide coverage. In other words, thumbs down for the public option. Needless to say, shoes almost started flying from some of the audience members and I received some heated comments during the question and answer period. Sadly, this was not the first time I have experienced this reaction when the topic of the public option is raised amongst its staunch supporters.

Now, I certainly don’t want to be a partisan complainer. I’ve had similar experiences with staff from the other side of the aisle when discussing additional health reform recommendations such as mandates and market reforms.

Aren’t we able to disagree respectfully? Shouldn’t all voices be heard, not just the ones that agree with you?What is so disheartening is that the self-employed and micro-businesses want reform. No, we NEED health care reform. In fact, we support almost every other reform recommendation out there – such as creation of an exchange or connector, cooperatives, market reforms like guaranteed issue and even mandates with the right mix of subsidies and cost containment mechanisms. Yet, it seems that all bets are off because we prefer to get our health insurance from a private insurer versus the federal government.

Maybe we can’t do it all when it comes to health reform, but there are options on the table that we all agree on that can really help our small business owners. A difference of opinion on one issue should not preclude collaborating and compromising on a reform approach. Yet the ire of both political parties is brewing and bubbling up regarding health reform, threatening to undermine any chance of providing micro-business owners and all Americans with access to meaningful, affordable coverage.

My outlook can be summed up in one word: disappointment. We were hoping for change, we were promised change yet it seems like all we are getting is more of the same from Congress.


As I watched the news announcing the 150 year sentence for Bernie Madoff, the mastermind behind a multi-billion dollar Ponzi scheme, my thoughts were focused on his victims. In this time of economic uncertainty, their nest eggs disappeared before their eyes and they will likely never receive full restitution. Like Madoff’s victims, the self-employed also experience a high level of uncertainty about whether they will achieve financial security to allow them to retire.

Close to 4o percent of micro-business owners are not at all confident or have little confidence that they will be able to save enough money to retire. The NASE also found in a 2007 survey that an overwhelming percentage – 8o% – do not offer retirement plans of any type for either owners or employees. The greatest barrier, reported by 62 percent of respondents, is the cost of administering and contributing to a retirement plan. More than one-third of micro-business owners acknowledged they were not saving for retirement at all.

The issue of financial security has increasingly become a growing concern for the self-employed due to our nation’s economic woes. The financial market’s meltdown coupled with the housing crisis has led to sharp declines in spending, leaving the self-employed with declining revenue yet increasing costs of doing business (i.e. health care). There is less and less money to put away for a rainy day.

With over three-quarters of micro-business owners indicating that they are relying on the federal government as their primary source for financing retirement, our policymakers must prioritize helping Americans, such as the self-employed, to save more for the future.   If they fail to do so, our government will be left footing a very large bill.

Every time we ask the self-employed to tell us what’s on their mind, they don’t disappoint. This week, I’ve been knee-deep in efforts surrounding the recent release of our survey on the health reform perspectives of the self-employed.

Here are some cool tidbits I learned from the results (print version):

  • The self-employed are following the health care debate like hawks. When asked how many had heard the term “public option” in relation to discussions surrounding reform, two-thirds indicated they were familiar with the term, and of those, 71 percent identified it correctly as “a health insurance program run by the government and open to anyone in need of health coverage.”
  • The top two health tax proposals favored by micro-businesses are providing tax credits to businesses and the self-employed to offset health care costs and reforming the tax treatment of health coverage so that, regardless of whether health insurance is purchased individually or accessed through an employer, the worker receives the same tax benefits.
  • The majority of respondents were neutral on a recent suggestion of a cap on the employer exclusion. However, there were quite a few who strongly opposed such a cap.

The above figures are cool – in the Public Affairs department, we LOVE having stats to pass along to media – but I always enjoyed being able to wade through individual responses. Our response system is completely anonymous, and even though I can’t “put a face” to each comment, reading them always gives me a better understanding of what people out in the “real world” are thinking. Many survey respondents gave specific comments on the public option, mandates and other issues impacting the health care reform conversation. Here are just a few examples:

I do not think the government should become an insurer. I do think the government should regulate private insurers more.

I do not agree with the government mandating how businesses should run. They have been unsuccessful with their own budgets. What qualifies them to stipulate this to successful businesses?

Employers should not provide coverage. Let individuals subscribe to whatever plan they want and let employees take home money to purchase insurance instead of the employer purchasing for it for them. Individual needs are different.

I do not think the government should be able to pick and choose the businesses that are required to carry health insurance for their workers.

I would prefer that the government not be involved in providing my health care. However, I also cannot continue to provide health insurance on my own through private insurers if they continue to increase premiums at the current rate. If I could not afford private insurance, I would hope that there would be some other option rather than no insurance. If that is a government policy, then so be it.

NASE Members: Do you have a comment to add about health reform or any of the topics mentioned above? I’d love to hear from you. Just leave a note below, drop us a line on Twitter (@NASEtweets or @koberlander) or visit our Facebook sites (Group and Fan pages) to weigh in.

Often times when policymakers are putting together economic recovery and stimulus packages, it is usually micro-business and the self-employed that are left out in the cold. This is not because legislators don’t care about micro-businesses, but rather because they are do not realize that the needs of the self-employed differ greatly from a small business with 25, 50 or 150 employees.

In February, President Obama signed into law the American Reinvestment and Recovery Act (ARRA), a stimulus package which included various spending projects and tax cuts to spur our ailing economy. In addition to some changes to various SBA loan programs, the big stimulus provision touted for small business was an extension of the $250,000 limit of Section 179 expensing. Of course, for some businesses that use expensive equipment such as construction or manufacturing this is an important provision. However, the average micro-business owner is not likely to purchase that much equipment in one year. Yet there is one new tax credit included in ARRA that, I am happy to report, will benefit the self-employed.

The “Making Work Pay” tax credit is a temporary refundable tax credit available in the 2009 and 2010 tax years that will allow the self-employed to receive a credit of up to $400 for individuals and $800 for married taxpayers filing jointly. To qualify, your gross income must be less than $75,000 or $150,000 for married couples. The Corporation for Economic Development’s (CFED) Self-Employment Tax Initiative estimates that the “Making Work Pay” tax credit could positively impact up to 15 million self-employed taxpayers or 68% of all Schedule C filers. Interestingly, it is not well known that this tax credit applies to the self-employed; yet, for all those entrepreneurs struggling in this difficult economic time, it could offer welcome financial assistance.

The “Making Work Pay” tax credit is the realization of the Obama administration’s promise to offer economic assistance to the middle class. We are pleased to see that they did not exclude the self-employed from their efforts.

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!

Since health care reform has risen to the top of the priority list for the Obama Administration and Congress, I spend a lot of my time trying to insert the self-employed perspective into this debate.  I will tell you that often this is not an easy task.  As of late I have been asked quite a bit about the National Association for the Self-Employed’s perspective on mandates. Congress has been batting around the idea of including in a health reform bill an employer mandate, requiring employers to provide and share in the cost of health insurance for their employees, and/or an individual mandate, requiring all individuals to purchase health coverage.  This idea received significant traction when major insurers announced they would support some key market reforms in exchange for the inclusion of an individual mandate.  This week, the fervor around mandates was kicked up a notch when President Obama indicated in an open letter to key Senators that he is amenable, with a few exemptions, to proposals for “shared responsibility — making every American responsible for having health insurance coverage, and asking that employers share in the cost.”

According to a June 2008 study by the NASE, only 18% of micro-business owners (10 or less employees) in our nation are currently providing health coverage to their employees.   Thus, the majority of the self-employed are purchasing health coverage in the individual market.  The biggest concern amongst the self-employed and micro-business is affordability of health coverage.   In addition, micro-business owners with employees also worry about the administrative burden of managing health care for their workers.  This segment of the business population believe that if reform proposals don’t include adequate cost containment measures or financial assistance such as health tax credits yet include a mandate requiring all to obtain coverage, they will be worse off than they are now.  And with the economy struggling as it is, forcing the self-employed to purchase coverage or provide coverage to their workers could mean the difference between staying in business or closing their doors.  Therefore, NASE members do not support mandating coverage at the present time.

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