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Health Care Reform: Study Sees Benefits for Small Businesses

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By Caleb Groos on June 11, 2009 4:11 PM

A study released today claims that small businesses would benefit from proposed health care reform even if required to help employees pay for coverage. Some claim that forced employer contributions would increase the burden on already stressed small businesses. Others claim this would actually improve small business' bottom line. Of course, the answer will largely depend on the details of whatever reform package becomes law.

As reported by Reuters, the Small Business Majority (a non-profit health care advocacy group) released a study it commissioned, which was conducted by M.I.T. economist Jonathan Gruber. Amongst its key findings, The Economic Impact of Healthcare Reform on Small Business study found that with certain health care reforms (discussed below), the following benefits would follow:

  • Small businesses would pay dramatically reduced costs to provide health insurance to their employees.
  • Small business jobs would be saved. The study cites health care costs as causing the loss of a projected 178,000 small business jobs by 2018. The study predicts that with health care reform, this could be reduced by up to 72%.
  • Small business employees' wages would be preserved. The study cites exploding health care costs as causing cuts in wages at small businesses. With reform bringing these costs down, more money would be left to pay wages.
  • Small business profits and competitiveness would be strengthened. Just like they eat into wages, health care costs cut into profits. Bringing them down, according to the study, would improve profitability.
  • "Job lock" would be reduced. Workers who feel locked to their job because they fear not finding comparable benefits would be freed up to change jobs. Small businesses providing health care would have a greater talent pool from which to choose employees.

So what are the types of reform factored in by the study?

As we know, legislators have yet to fix the details of any health care reform we might see. A requirement that people have health insurance, along with a mechanism to purchase insurance through a governmental clearinghouse both appear possible. While these are less than certain, the extent to which employers will be obligated to provide coverage remains even more unclear.

The study released today looked at three variations featuring differing levels of what many believe will be components of the eventual reform package: (1) an obligation on some or all employers to contribute to employee coverage, (2) penalty payments for those that don't, and (3) tax credits for those that do.

There is a spectrum possible within all of these components. For example, some proposals have employers with less than 11 employees exempted from the requirement to contribute, while other call for universal employer obligations. The amount of suggested penalty payments also varies, as does the eligibility for, and size of tax credits for contributing employers.

As discussed previously, the percentage of small business owners able to offer health benefits reportedly dropped from 67% in 1995 to 38% in 2008.

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