Small Business Economic Impact of Health Care Reform
As you know, small business plays a vital role in the U.S. Economy. And small business, of course, is the economic generator of job growth and innovation in our country. Currently, U.S. small businesses are at a disadvantage relative to large U.S. Companies with regards to employee health care. Here is my position: In the U.S., small businesses pay as much as 18 percent more per worker than large businesses for the same health insurance coverage (healthcare.org). This is approach is counterproductive to the economic engine that is small business in this country.
Some background statistics:
- Firms with fewer than 20 employees accounted for approximately 18 percent of private sector jobs in 2006 and nearly 25 percent of the net employment growth from 1992 to 2005.
- Health care costs are generally transferred to employees in the form of lower wages.
- Health care costs decrease business profits that would otherwise be used for research and development or capital investment.
- Because of the higher health care cost for small employers, they are far less likely to offer health insurance for their workers.
- In 2008, only 49% of firms with 3 to 9 employees offered any type of health insurance to employees, this down from 58% in 2002 (healthcare.org).
- The number changes as the number of employees increases: Also in the 2008 study by Healtcare.org, 78% of firms with 10 to 24 employees offered any type of health insurance to employees.
I believe the government means well by passing the current ObamaCare health care reform legislation. Some companies and employees will benefit. For example, the legislation includes a small employer tax credit (initially 35% growing to 50% in 2014) for companies with less than 25 employees and average earnings under $50,000.
There are other provisions, such as eliminating lifetime maximum coverage, covering dependents until age 26, the development of health insurance exchanges, and a requirement for Insurance Companies to meet a minimum loss ratio. On their face, these provisions seem good. However, we know that nothing is “free”.
The ObamaCare program hinges on there being excess fat and waste in the private health insurance sector that will be magically “reallocated” or “utilized” with the new plan. Unfortunately, based on empirical evidence, when government mandates additional coverage, costs, and in this case premiums, will increase.
We know the intent of ObamaCare is to move the U.S. economy towards a government run health care system. This will bring positives and negatives. A significant positive is that theoretically everyone would have health insurance. Some would say that everyone already has insurance because our emergency rooms cannot turn anyone away. A negative would be that as ObamaCare ferments, competition will not be encouraged. Currently you can choose from multiple locations for an MRI. From a manufacturing standpoint, this isn’t “lean”. Many predict the government would centralize such services in an effort to control costs, the result being a rationing of health care. You’ll be waiting like they do in Canada for your health care.
It’s true prescription drug costs are high, and same or like products can be purchased for less in Canada. The other side of the coin is that thousands of Canadians visit the U.S. every year for health care. Namely, surgeries. Why? The Canadian health care system is provides exceptional preventative care; however, if you need treatment the system provides limited facilities and specialists to provide you with your needed care. The result is patients wait. And, because of limited resources, back office prioritization occurs.
I would suggest health care costs are going to continue to increase and I fear that the more government is involved, the worse this problem will become.
ObamaCare paints a bleak picture of the health insurance sector. Everyone likes to position blame on profiteers, this approach has resonated with the short-sighted voters that support ObamaCare. I believe that while health insurance providers have room for cost control improvement, they are a small piece of why costs continue to rise. In simple terms, health insurance providers are merely a financing mechanism to pay for health care costs. The reform measures that are slated to go live by 2014 do little to address the true drivers of health care costs which include malpractice costs, labor costs, physical plant costs and pharma costs.
Health insurance companies receive bills and pay bills. ObamaCare will mandate the health insurance companies to pay more bills with less revenue and no cost reduction. Nothing is being exacted by this legislation to decrease the size of the bills. This returns us to the ObamaCare assumption that there is profit or fat to be leveraged in the current system to cover these increases. Statistics tells us otherwise. Health insurance companies operate on relatively small profit margins as a percentage of overall business.
Lastly, it is reasonable to compare the potential success of government health care reform with the government’s existing Medicare program. Currently, our government manages Medicare and Medicaid to a loss each year. In trying to make the program solvent the approach now is limit will be paid. This leads to “cost shifting”. For example, if an office visit fee would typically be $65; Medicare reimburses the clinic $50. The clinic then shifts the balance, $15, to your private insurance provider who may or may not pay the bill. Ultimately, the price of office visits will increase to cover this shortfall. Ironically, if the government controls the entire health care system there won’t be a private sector to shift costs to anymore.
I welcome your input.
Craig Kruckeberg
Minimizer
CEO & Chief Visionary Officer
1.800.248.3855 • 507.583.2112
 |
