Research Briefing

Obama’s Restrictions On Employers Could “Soon Be The Law Of The Land”

ROBERT GIBBS: “I Think Whoever Sits Here This Time Next Week, You Will Be Talking About Healthcare Reform Not As A Presidential Proposal, But As Something That Will Soon Be The Law Of The Land.” (Robert Gibbs, Fox News’s “Fox News Sunday,” 3/14/10)

IF HOUSE DEMS PASS OBAMA’S GOVERNMENT TAKEOVER OF HEALTH CARE, SMALL BUSINESSES WILL LOSE FREEDOM TO HAVE EMPLOYEES PICK INSURANCE OF THEIR CHOICE

Obama’s Insurance Regulations Could Force Americans, Their Employers To Switch From HSAs To More Expensive, Less Flexible Government-Run Plan. “Hundreds of companies now offer Health Savings Accounts to about 5 million employees ... The bills seriously endanger the trend toward consumer-driven care in general. By requiring minimum packages, they would prevent patients from choosing stripped-down plans that cover only major medical expenses. ‘The government could set extremely low deductibles that would eliminate HSAs,’ says John Goodman of the National Center for Policy Analysis ...” (Shawn Tully, “5 Freedoms You’ll Lose In Health Care Reform,” Fortune, 7/24/09)

Even Though Health Savings Accounts (HSAs) Help Businesses Save Money. “A consumer-directed health plan is an insurance coverage with a high deductible that is typically combined with a health-savings account, the tax-advantaged product that is either funded by the employer or by regular contributions from employees. Enrollees use the accounts to pay for qualified health expenses before they reach the deductible. ... According to a recently released study of health care claims … employers who offered health savings or reimbursement plans saved $21 million per 10,000 members over a five-year period. Employers who offered the plans as an option experienced savings of $7 million per 10,000 members over the five-year period, according to the company’s survey.” (Greg Bordonaro, “Consumer-Directed Health Plans Gain ,” Hartford Business, 7/6/09)

ONLY PART OF THE REASON WHY SMALL BUSINESSES WILL BE BURDENED WITH HIGHER HEALTH COSTS …

Small Businesses Already Pay More Than Large Businesses For The Same Health Care Plan. “Small businesses are at a particular disadvantage. A study … found that the smallest employers pay an average of 18 percent more than large businesses for the same health plan, because they don’t benefit from pooled risk the way a large business does, and administrative costs tend to be higher. This leads many small businesses to offer fewer benefits and pass on more of the cost to workers.” (Jenny Gold, “Some Small Businesses See Burden In ‘Cadillac’ Tax,” Kaiser Health News, 3/4/10)

But Obama’s Tax On Health Insurance Would Hit Small Business Hardest. “Small employers would also probably be hit by the taxes ... small businesses tend to pay more for their insurance than bigger employers that can negotiate better premiums ... About 14 percent of small employers, counted as those with fewer than 500 workers, now offer policies that would be subject to the excise tax ... ‘That is a very heavy hammer on the cost of your premiums,’ said Donna Marshall, the executive director of the Colorado Business Group on Health ... ‘You don’t want to cause a chilling effect on the employers who are trying to do the right thing.’” (Reed Abelson, “A Proposed Tax On The Cadillac Insurance Plans May Also Hit The Chevys,” The New York Times, 9/20/09)

Small Business Owner Said The Cost Of Health Insurance Is “The Difference Between Success And Failure.” “Ellen Warner and her husband Mark run a small online store out of the basement of their home in Cumming, Ga., a suburb of Atlanta. … Warner says the high cost of health insurance coverage ‘means that instead of making a profit last year, we lost money. It means the difference between success and failure in a business.’” (Jenny Gold, “Some Small Businesses See Burden In ‘Cadillac’ Tax,” Kaiser Health News, 3/4/10)

LIMITING THEIR ABILITY TO HIRE NEW WORKERS, EXPAND THEIR BUSINESSES …

Obama’s Taxes Could Cause “The Economy To Produce $752 Billion Less Worth Of Goods And Services.” “The bill’s taxes, penalties, and fees on investors and businesses would decrease the amount of investment in the economy. This reduced investment would in turn lead to a decline in productivity, causing the economy to produce $752 billion less worth of goods and services. A smaller economic pie would mean workers earn lower wages and salaries. Higher taxes on investment also put upward pressure on interest rates as investors seek to achieve their after-tax desired rate of return.” (Karen A. Campbell, et. al., “Mandates And Taxes Re-Burden Health Insurance Markets,” Heritage Foundation Web Memo, 3/16/10)

And Could Cause 690,000 Net Job Losses. “The dynamic analysis shows that this bill would result in 690,000 net job losses, many of which would be in the health services industry. These losses represent both cutbacks in jobs and jobs that are simply never created as talented individuals choose to specialize in other industries that are not subject to the government’s payment squeezes.’” (Karen A. Campbell, et. al., “Mandates And Taxes Re-Burden Health Insurance Markets,” Heritage Foundation Web Memo, 3/16/10)

New Regulations On Businesses Will Make It More Difficult For Employers To Hire Workers They Need, Especially Low-Income Workers. “[E]mployers who do not offer ‘affordable’ coverage to employees would have to help pay the cost of such benefits for their low-income workers ... The Center on Budget and Policy Priorities, a liberal research and advocacy group, said this proposal ‘could unintentionally discourage the hiring of lower-income people,’ by adding a new ‘health surcharge’ to the cost of employing them.” (Jeff Zeleny & Robert Pear, “Obama Says Government Health Coverage Plan Would Not Hurt Private Insurers,” The New York Times, 6/23/09)

• In Lorain County Ohio, The Threat Of Obama’s Medical Device Tax Causing One Of The Largest Businesses To Stop Hiring. “[I]n the short run, some of his policies could cost existing jobs, especially health-care reform, if it is enacted. One of the few large businesses that has prospered in Lorain County in recent years has been Invacare, a maker of home medical devices … The company has 1,300 employees in Lorain County but has stopped hiring in anticipation of a tax on medical devices that was proposed to help pay for the president’s health-care reform plan.” (Michael A. Fletcher, “Assessing Obama’s Promises Of Jobs In A Hub Of Manufacturing,” The Washington Post, 1/22/09)

Obama’s Medicare Payroll Tax Hike Would Hit Many Small Business Owners. “The legislation would be paid for through a ... a payroll tax on the wealthy ...”; “In a 2007 survey, the National Federation of Independent Business found that about 15 percent of small-business owners -- and half of those with at least 20 employees -- said they expected their household income to exceed $200,000.” (Ricardo Alonso-Zaldivar, “Tempers Flare As Senate Debates Health Care,” The Associated Press, 12/2/09; Lori Montgomery and V. Dion Hayes, “Small Businesses Brace For Tax Battle,” The Washington Post, 4/27/09)

• Impact On Small Businesses Would Be Felt By All Americans Through Higher Prices For Goods. “[M]iddle- and lower-income workers would indirectly bear a significant part of the burden of the surtaxes on higher-income individuals. .. Moreover, middle- and lower-income households additionally bear some of the tax as consumers, because output is reduced, and consumers of all income levels must make do with fewer, higher-priced goods and services.” (Michael Schuyler, “The Surtax: Worse Than The Alternative Minimum Tax,” National Center For Policy Analysis, 10/29/07)