As America’s six million small business employers (1-499 employees) increasingly struggle to stay afloat during the worst economic downturn since the Great Depression, the President and U.S. Congress are working hard to saddle them with new health insurance mandates that will sink many and force many more to lay off workers. The proposed legislation—named without a whiff of intended irony The Affordable Health Choices Act—will require all but the smallest employers to offer massively rich health benefits that far exceed what most provide today.
Besides the benefits, the bill requires employers to directly shoulder 72.5% of single and 65% of family premiums—far more than many pay now. Any company that fails to comply will be forced to pay a fine to the government of up to 8% of total payroll—money that will not be available for their own employees to buy insurance. Instead the funds will flow into the federal till to help subsidize American families making up to $88,000 per year—instantly converting much of the country’s middle class into a new welfare class.
Since almost 40% of American smallest business employers (1-199 employees) can no longer afford to offer any employee health insurance, it is highly unlikely they will be able to do so under the government’s new rules. As for those that still do provide it, most have already converted to lower-cost “consumer-driven health plans.” Such high-deductible insurance plans, often accompanied by health savings accounts, have comprised one of the few bright spots for controlling health care costs in recent years. But the proposed legislation will virtually wipe out this option, replacing deductibles and percentage-based coinsurance with fixed-dollar copayments that completely disconnect employees from knowing or caring about the actual cost of the medical services they consume. That will mean even higher premiums that an increasing number of small employers will be unable to afford.
A potentially huge number of small businesses—and many large ones—will likely be forced to drop their insurance coverage altogether and just pay the 8% penalty and dump their employees into the government’s public insurance plan (other rules in the bill will all but forbid private insurers from profitably competing in the proposed health insurance exchange). These workers will either have to buy individual insurance coverage or else pay their own penalty taxes—in addition to the penalties paid by their employers.
This all threatens dire consequences for America’s small businesses, since they will have to come up with the money to pay these higher premiums or government penalties—huge sums for companies already brought to the brink of failure by hard economic times. Initially, some employers might be able to accept losses, attempt to raise prices, or cut expenses. But, eventually, few will be able to avoid firing employees, since the proposed law virtually prohibits reductions in employee wages to fund the penalties or insurance premiums. Otherwise, many companies will go out of business.
America’s small business employers account for the vast majority of the nation’s total employment and virtually all of its net job growth during recent decades. Yet they too often lack the clout of America’s big companies to lobby Congress or to testify before its committees for the simple reason that their owners and managers have to be at work every day just to survive. My concern is that passage of the proposed Affordable Health Choices Act will do serious damage to our most dynamic engine of economic growth and send the country’s unemployment rate to levels not seen since the 1930’s.
There is no question we need radical health care reform, but there are far more effective ways to get it without resorting to an even heavier government hand in the health care marketplace. One such option is The American Choice Health Plan, which I have detailed in my latest book and elsewhere, that will dramatically lower health care costs, improve medical quality, and provide affordable health insurance for everyone—all without mandates on either employers or their workers. None of this will be achieved by the government’s horribly misnamed Affordable Health Choices Act. Americans deserve far better.