Friday, February 26
Yesterday, President Obama hosted a health care summit to bring Democrats and Republicans together in a final effort to discuss the future of health care reform in the U.S. During this summit, President Obama and leaders from both sides of the aisle discussed the most contentious issues at play in the health care debate. The goal of the summit was to uncover ways Republicans and Democrats can compromise on key provisions in the health care legislation and breathe new life back into this effort.
As many of you know, COSE has a rich history in its advocacy efforts to make health care more affordable and to help small businesses provide health care coverage to their employees. The prospect of federal health care reform remains contingent on Congress and President Obama's ability to address fundamental differences in their approach to reform. Yesterday really didn't take us any further down the path - it just provided one more forum to highlight those positions and move further from addressing practical solutions to the fundamental issue we face - the escalating cost of care.
Below you will find an outline of some of the key initiatives discussed [or not discussed] during this summit and the impact they may have on small business. As small business owners continue to face rising health insurance costs, I encourage our legislators to utilize this information as a roadmap to better understand the real reform efforts small businesses are asking for.
Small business tax credits: Although COSE is encouraged to see provisions discussed that acknowledge the impact of health care costs on small businesses, the tax credits being proposed are not aggressive enough to compel small business owners to increase their benefit offering. For example, the Congressional Budget Office (CBO) has estimated that the market reforms will increase premiums by up to 2% for small groups, in addition to the normal yearly cost increases. However, as CBO estimates, only 12% of businesses covered in the small group market would be eligible for these temporary tax credits to help partially offset the premium costs. As currently structured, these credits will do little to incent change in the marketplace.
Expand coverage and create basic plans: In order to make health care more affordable, we must initiate reform that will bring everyone into the system. COSE understands the challenges many consumers see with regard to an individual mandate. Small businesses often find themselves dealing with working within the confines of different types of mandates created in the name of the public good as they run their own businesses. For health care to work, and in order to truly lower the cost of care, we must strongly consider a program that will bring everyone into the health care system, thereby spreading the risk over a larger group. This will also expose consumers to the costs in today's system and help drive broader change as people become more educated on the impact of their own decision making, lifestyles and utilization. The coverage required, however, should be a basic plan that deals with catastrophic coverage and preventative care. Starting with today's federal plans as a minimum threshold makes required coverage too expensive for many individuals to afford and too expensive for the government to subsidize.
Self-employment tax on health care: Unfortunately, none of the legislative proposals or discussions during the health care summit included parity for the self-employed. Presently, health insurance costs are deductible for income tax calculations for the self-employed but are not deductable for payroll tax calculations. If the self-employed were given the equal tax treatment that larger corporations were granted long ago, their coverage costs would decrease by 15.2%. COSE believes that any final health care reform legislation must include this provision and address this inequity.
Consumer driven health plans: The House and Senate bills limit the availability of consumer driven health plans (CDHPs) such as HSAs and HRAs and the President's proposal does not specify the availability of CDHP's under a reformed health care system. CDHP's play a critical role in health care cost containment, consumer education and responsibility. In fact, studies have shown that there is immediate and sustainable cost savings: CDHP medical costs are 14% less than traditional plans the first year; cumulative cost savings rise to 19% in the second year, 23% in the third year and 26% in the fourth year. For that reason, COSE urges legislators to include provisions in health care reform legislation that will allow individuals to continue utilizing these important cost-saving and awareness building resources.
And, as it relates to small business group purchasing, old approaches that have been shown to benefit few at the cost of many like Association Health Plan legislation turned back a few years ago will do nothing to deal with the real costs of care in today's system. Actuarial studies have shown that at best they may provide a couple of pennies of administrative cost relief for a small minority of businesses. At worst, they will accelerate adverse selection and raise rates in the double digits for the majority of small businesses.
Although this summit provided a platform for both parties to discuss their differences and similarities with regard to health care reform, the future of this current reform initiative feels uncertain. We have focused on health care reform and have come closer to this goal over the past year than we have for some time. While we continue to navigate through these challenges and differences, our elected officials need to come to the table with the goal of significant change and significant cost reduction. Last year, 1 in 5 small business owners were forced to reduce their workforce in order to cope with rising health insurance costs and many business owners cut back or cut off the benefits they provide for their remaining employees. Let's work to develop reform that truly addresses the needs of small business and empowers them to continue operating as the engine of this economy.
Posted by:Steve Millard