Tuesday, November 3, 2009

How Health Reform will affect Small Businesses in NH

By Zandra Rice Hawkins,
NH Voices for Health

Small businesses have a special stake in the health care reform discussion, especially in New Hampshire where many family and locally owned businesses have difficulty finding affordable health care coverage for employees and their own families. There’s a lot of information out there about federal health reform but it’s often difficult to pinpoint how the reforms will impact individual constituencies.  NH Voices for Health recently joined with the Small Business Majority and Change That Works to provide small businesses in our state with the latest information about health reform – how the proposals will impact NH small businesses and how they can get involved in advocating for health reform that will make it easier for them to afford quality health coverage for their employees and their own families.

 As Terry Gardiner, National Policy Director of the Small Business Majority, points out, health care reform for small businesses means not only addressing skyrocketing costs and unpredictable premiums –  which threaten businesses’ viability and profits as well as jobs and wages – but also cutting administrative overhead (the time it takes to research, apply for and compare plans is an incredible burden for any small business owner who has ever had to undertake this project).

So how do the current bills in Congress stack up?  Gardiner pointed out a number of provisions included in all of the bills that will mark a positive change for the small business community.

For starters, the House, the Senate HELP committee and the Senate Finance committee (SFC)  bills all seek to reduce costs for small businesses by creating a small business insurance pool through a health insurance exchange. The exchange allows small businesses to join together in purchasing insurance to increase their negotiating power and provide them with more choice and stability   – all of which should lower premiums.  The exchange also  provides more accessibility and comparable information for businesses and individuals trying to compare health care plans and makes the task of purchasing coverage more efficient. The House plan allows small business owners to skip researching and negotiating plans and just let employees choose for themselves what best fits their own needs while the employer contribution is paid directly into the exchange. This is the system that the federal government uses for its own employees.

There are some key differences between how the committees structure the exchange – including whether the exchange is national or state-based, what size employers will be eligible to purchase through the exchange and timeline for getting the exchange up and running.  The House version would create a national exchange by 2013. It would initially allow individuals and firms up to 15 employees to participate and then has a plan to expand to larger businesses in the three years following. In contrast, both Senate bills would create state-by-state exchanges. Under the Senate Finance Committee version, the state exchanges would start in 2011 for businesses up to 50 people and then phase in businesses up to 100 people by 2015. It also allows states to voluntarily allow employers with more than 100 employees to use the exchange starting in 2017, but that will be a state-by-state decision.

In comparing the national versus state-by-state approach there are pros and cons on both sides.  The House’s national exchange would be larger, giving it increased negotiating power and allowing it to maximize competition and efficiency.  This is particularly the case in comparing a national exchange to individual exchanges in small states like New Hampshire.  The state-by-state exchanges, on the other hand, would make it easier to enforce state insurance regulations and consumer protections, which are relatively strong in New Hampshire.

The small business tax credits included in all 3 bills are another key aspect in ensuring affordability of and access to coverage for the small business community.  According to the Small Business Majority, the bills target the smallest companies and then work from there to expand coverage. They all include limitations based on employee size or payroll to help ensure that small businesses are truly the beneficiaries of the tax credits designed to help them provide health care coverage.

Under the House bill, businesses with 10 or fewer employees with average annual wages of $20,000 or below would receive a credit of up to 50% of their premium contributions, with businesses up to  25 employees and average annual wages up to $40,000 receiving a reduced credit on a sliding scale.   The Senate HELP committee would provide tax credits of up to $2,000 per employee as early as next year for employers with 50 or fewer full-time workers with average annual wages below $50,000 provided that the employer pays 60 percent or more of their employees’ health insurance premiums. And the third health care bill in the mix – the Senate Finance committee bill –  offers tax credits up to 35% of the employer contribution in 2011 and 2012 and up to 50% of the employer contribution after that to businesses with fewer than 25 full-time employees and average wages of less than $40,000 if the employer contributes at least 50% of the total premium.  This last bill explicitly excludes sole proprietorships and family members from the small business tax credits while the other versions are more open.  While both Senate bills specify that credits are also available to non-profit employers (that don’t pay taxes), the SFC bill offers smaller credits to those employers.  This is an important issue in New Hampshire given our large non-profit sector.

Additionally, the bills propose many reforms to bring down the overall inflation rate of health care costs as well as end discriminatory practices that bar small businesses from accessing the coverage they need. For example, insurers will be prohibited from medical screening for health conditions and exclusion of coverage for pre-existing conditions – two oft-cited barriers for sole proprietors and small businesses. What’s more is that all three bill versions address rate regulations and prohibit the use of health status in determining premiums. This is a particular boon for small businesses with older workforces; during the teleconference, Gardiner pointed out that a steep increase in your premium from one year to the next could be explained simply by the fact that you or an employee turned 50 years old and you are penalized because of it. This is called age rating, and it could happen to any company. The bills look at how to make this common-day occurrence less of a prohibitive factor in attaining affordable health care coverage, though the HELP and House versions have strong protections against discrimination based on age as compared to the SFC bill. 

All of these provisions would help shape the plans insurers offer and what coverage employers and employees can afford.    Gardiner also pointed out that key to bending the cost curve are proposals in each of the bill to make system reforms that contain health care costs and the inclusion of the public plan option in the House in HELP bills, which the Congressional Budget Office estimates will lead to savings of 10%.

To ensure that these reforms and measures have the desired impact of increasing access to quality, affordable coverage and bending the cost curve for everyone, every individual would be required to obtain health insurance. Premium assistance would be provided for lower-wage employees, on a sliding scale. The proposals also incorporate a belief that employers have responsibility for offering their employees coverage if they are able to.  Under the House version, employers would be required to provide health benefits for their employees or pay a fee (ranging from 2% to 8% of payroll), with small businesses with less than $500,000 payroll exempt from the requirement  and the fee phasing in above that level.  In the Senate HELP bill, employers not offering coverage would pay a flat $750 annual fee per full-time employee and $375 per part-timer, with an exemption for employers with fewer than 25 employees.

The  Senate Finance takes another avenue.  Instead of requiring that most employer “play or pay” (offer coverage or pay a fee), the bill  institutes a fee employers must pay only if  an employee receives a tax credit to purchase coverage through the insurance exchange, which is basically designed to cover the cost of that subsidy.  This structure, in particular, is a concern to advocates outside of the business community that worry about its possible impact on hiring decisions.

In Gardiner’s eyes, the balance of supporting small businesses at the same time of trying to increase coverage overall is important.  He pointed out that while the House and Senate HELP bills provide $8 billion a year in tax credits to small businesses, that’s only 3-5% of cost of federal health care reform. And the investment is well worth it: after all, 65 million people get paychecks from small businesses.  Clearly, the importance of the small business community can’t be overstated in New Hampshire.

To see a break-down of these costs and a full overview of the small business briefing, to listen to a recording of the briefing and to see a broader comparison of the 3 bills, readers can visit http://www.nhvoicesforhealth.org/WEBSITE%2009/09USFEDERALPOLICY.htm (relevant links are in the “Updates” section). For specific questions regarding small business opportunities to participate in federal health care reform discussions, email zandra@nhvoicesforhealth.org.

Tags: affordable health care, Health Reform, New Hampshire, small business

This entry was posted on Tuesday, November 3rd, 2009 at 9:38 am and is filed under Health Reform, Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.