March 21, 2008

Small Businesses Lead Charge on Health Care Reform

Once opposed to health care reform, small businesses are now embracing the initiative, lobbying presidential candidates and pushing for changes to taxes and state laws to help stem the crushing costs of health care.

These "Ëœmom and pop' businesses, which average 10 employees, now comprise the majority of the country's employers.   During the 1990s, small business owners, along with the National Federation of Independent Business (NFIB), played a key role in derailing President Clinton's health care reform agenda, implementing comprehensive direct mail and telephone campaigns and an onslaught of lawmaker lobbying. 

However, with premiums increasing at twice the rate of inflation in recent years, small businesses are now more than ready for change.

"The situation for small business is much worse than it was in 1994 in terms of cost," Todd Stottlemyer, NFIB's President, told Reuters.

"We can't just say 'no' today."

Small companies bear a heavier burden in providing health care for their employees than do larger companies, whose per-employee expense is much less costly because there are more employees to balance risk and spread administrative costs.

According to a study by the Commonwealth Fund, a nonprofit research group, small company workers pay 18 percent more for premiums than their counterparts at larger firms.

"The NFIB is starting to listen to its members," Peter Harbage, a Democrat health strategist who has worked for former presidential candidate John Edwards, told Reuters. "The whole health-care system seems designed to work against small business," he said.

Small companies represent 80 percent of total U.S. employment, and hold strong influence in grass root politics.   

"These are the business people that go to the Rotary Club lunches their congressman speaks at," said Robert Laszewski, president of the consulting firm Health Policy and Strategy Associates. "They have the numbers, and the personal relationships with the congressmen."

Earlier this month, the group launched its multimillion-dollar campaign with letters to candidates and town hall meetings with members across the country. Polls among its members have shown one-third of all small-business owners say health care reform is their top voting issue in the 2008 presidential election.

Indeed, they've already influenced the debate.

Senator Hillary Clinton of New York, a possible Democrat 2008 presidential candidate who led the overhaul effort for Bill Clinton, makes a small business exception in her proposal to require employers to provide insurance or pay into a fund that does.

Experts say that is a direct result of NFIB's opposition to her previous efforts.

Although the group has not taken a formal position on the issue of individual mandates to buy insurance, it held an exploratory briefing on the subject this week.   Stottlemyer said the group supports proposals allowing small businesses to pool together for greater leverage with insurers.

"All three (candidates) are talking about it, but they are not at a deep detail level right now," he said. "We're urging them for more details."

In general, the Democrats seek universal coverage through building on the current employment-based insurance system, while Senator John McCain, the 2008 Republican presidential candidate, advocates revising the tax system and having individuals buy insurance outside of work. McCain's proposal would eliminate the tax breaks employees receive by getting insurance through work. 

Stottlemyer said that half within the small-business community are forced to buy their insurance individually, a far more expensive option than group plans.

"There is some equalization that we think needs to take place," he said.

Experts say removing employer tax incentives could encourage employers to abandon health insurance altogether.  And some critics also claim that more flexibility in state insurance regulations could erode consumer protections.

But as the issue plays out during the upcoming presidential election, small business will take a lead in influencing the debate.

"They were a major player in dumping the Clinton plan. They don't want to be the enemy this time," Henry Aaron, a health-care economist at the Brookings Institution, told Reuters. "They know it's a national problem."


On the Net:

National Federation of Independent Business (NFIB)

Commonwealth Fund