Small Business and Health Care Reform

Recently, HCS presented at the Healthcare Reform Conference of the Employers’ Health Congress.  Our audience was comprised mainly of representatives from large companies seeking information about compliance with the new law’s mandates.  These companies do not need to be enticed to participate in reform because they will be penalized if they do not.  As of 2014, employers with fifty or more employees who do not offer health insurance coverage to their workers will pay an assessment for each employee who obtains benefits as an individual. 

For small businesses, participation in healthcare reform is less certain.  For the White House, small businesses’ participation in healthcare reform is essential.

At the signing ceremony for the landmark legislation he championed, President Obama delivered the message that the new law would benefit small businesses.  The President recited provisions of the act that will take immediate effect and his first example was a tax credit for small businesses to help them cover the cost of insurance for their employees.  When the President shifted the focus of his speech to the impact of the law in years to come, he again began with small businesses, promising that the health insurance exchanges created by the law will become “a competitive marketplace where uninsured people and small businesses will finally be able to purchase affordable, quality insurance.”  Finally, as the President announced people to whom who he was dedicating his signing of the law, just after acknowledging his own deceased mother he turned the spotlight onto Ryan Smith, an employer of five who was invited to take part in the ceremony. 

Small businesses’ involvement in implementation of the healthcare reform law is crucial to the accomplishment of the President’s goal of universal coverage.  An estimated 60% of America’s uninsured are small business owners, workers and their families.  While the new law is paid for - in part - by a payroll tax increase on individuals, the law explicitly exempts from this tax increase income earned by people running small, closely-held businesses. 

Despite passage of this legislation, small businesses may still find employee health coverage unaffordable.  Their options for offering coverage should increase and their employees’ options for individual coverage certainly will.  In 2014, state-based insurance exchanges established by the new law will begin to operate, and small businesses will be able to pool together to buy insurance.  Small businesses will be encouraged to participate in the exchanges with further tax credits of up to 50% of their employees’ premiums for two years.  

Engagement of small businesses will be critical to the President’s goal of expanding health insurance coverage to more Americans.  If this outreach to small businesses fails, our current system of employer-based health coverage will cease to exist.  Though health coverage may survive as a perk of employment by a large company or public agency, more Americans will be responsible for their own insurance coverage.  These individuals will be faced with a choice, to buy insurance or to pay the IRS to remain uninsured.  If healthy individuals – particularly young people – remain uninsured, the costs of insurance will continue to climb as coverage is maintained only by the sick.

Some sound theories have been put into law with the passage of the healthcare reform legislation.  Now, the success of the President’s plan will depend on the effectiveness of its implementation.  

About the Author:

David K. Ries is chief legal counsel for San Diego-based Human Capital Specialists Inc. (www.hcspecialists.com), a management-consulting firm that specializes in the healthcare industry and advocates for improvements within the system. Contact him at (619) 696-9655 or dries@hcspecialists.com