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Small Business Health Care: A Vital Reform for Sustainable Growth

This article explores the critical importance of health care reform for small businesses, showcasing their significant impact in job creation and innovation. It delves into the challenges faced by small employers in offering health benefits and presents proposed solutions, including the NSBA Health Care Proposal. By advocating for individual responsibility, broad insurance market reform, subsidies for low-income families, reshaping tax incentives, and emphasizing cost reduction and quality improvement through increased consumerism and IT integration, the proposal aims to create a fairer and more efficient health care system for all.

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Small Business Health Care: A Vital Reform for Sustainable Growth

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  1. The Breaking Point  Why health care reform is crucial to small business By: Todd O. McCracken, President

  2. Why Does Small Business Matter? • Small Firms: • Represent 99.7 percent of all employer firms • Employ half of all private sector employees • Create between 60 to 80 percent of all net new jobs • Produce 13 to 14 times more patents per employee than large firms • The small business share of employment remains around 50 percent • 78 percent of small businesses have fewer than 10 employees • 61 percent of small businesses are micro-businesses with fewer than 4 employees

  3. Total Premium Increase Compared Against Other Economic Indicators 2000 - 2006 Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 2000-2006

  4. Annual Premium Increase Compared Against Other Economic Indicators 2000 - 2006 Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 2000-2006

  5. Annual Premium Increase by Employer Size Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 2000-2006 *2000- 2003 data uses firm size of 3 to 9, 2004-2006 reports consolidated very small businesses to 3-24 workers

  6. Comparison of Premium Increases by Employer Size Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 2000-2006 *2001 and 2003 data uses firm size of 3 to 9, 2005 and 2006 reports did not distinguish between 3 and 24 employees.

  7. Percentage of Businesses Offering Health Benefits by Firm Size Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 1999-2006; KPMG Survey of Employer-Sponsored Health Benefits, 1996.

  8. Overall Percentage of Firms Offering Health Benefits, 2000 - 2006 Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 2006

  9. Percentage of Firms Offering Health Benefits, by Firm Size in 2006 Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 2005

  10. Percentage of Businesses Offering More than One Health Plan Option by Firm Size

  11. Percentage of Small Employers Considering Changes to Employee Health Plans Source: NSBA Member Survey, October 2005

  12. Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 2005

  13. Expected Changes to Employee Insurance Plans Source: NSBA Member Survey, October 2005

  14. Percentage of Employee Premium Paid for by Employer Source: NSBA Member Survey, October 2005

  15. Employee Premium Cost-Sharing Trend Small vs Large Business Source:Hewitt Associates, US Bureau of Labor Statistics

  16. Allowable State Variations Within a Particular Plan Source: National Association of Insurance Commissioners

  17. Piecemeal Solutions:Why They Won’t Work • Association Health Plans (AHPs) • Attempt to provide cost-cutting by allowing trade-associations to create a national pool for their members under a new set of federal rules • Would create adverse selection and segment the market due to AHP’s ability to skim off the healthiest individuals. • Small Employer Health Benefit Plans (SEHPB) • Patterned after federal employees’ health plan, SEHPBs would establish a federally-run insurance pool for small businesses • Would create adverse selection on part of the SEHPB due to a rich benefit package, guarantee issue and government subsidies on the plan • Enzi Health Care Proposal • Would allow for limited AHPs with state oversight and preempt certain states’ rating rules • Best of all three initiatives, but doesn’t go far enough in creating broad reform and enhancing consumer involvement

  18. NSBA Health Care Proposal • Individual Responsibility • All individuals would be required to obtain coverage providing for the spreading of risk with all individuals in the insurance pool. • Broad Reform of the Insurance Market • Establishment of a federally-defined basic minimum package that is truly basic in nature • Actuairily-determined rate bands established within which insurance companies could price their products • Insurance companies would operate under a guarantee issue system • States would retain oversight and authority over all plans under the federal framework • Provide Subsidies for Low- Income • Individuals and families would receive federal financial assistance for health premiums, based upon income • Reshape Health Insurance Tax Incentives • Tax parity for all purchase of health insurance, whether purchased through an employer or individually • Cap tax-preference on health expenditures at the premium level for the required package • Reduce Costs and Improve Quality • Instituting increased consumerism requires ample information be available to consumers • Increased IT in health care through electronic medical records and procedures to both reduce errors and increase efficiency • Pay-for-Performance based on actual health outcomes and standards established through evidence-based indicators and protocols

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