In the last two days former Bush Administration economic advisor Keith Hennessey has posted two useful summaries of the draft Senate and House healthcare reform bills which should be presented in their respective houses. The second post, since it is an annotated version of the first, is all you really need to read.
One of the things that caught my eye in the post was the provision for an employer mandate:
The Kennedy-Dodd bill would also create an employer mandate. Employers would have to offer insurance to their employees. Employers would have to pay at least a certain percentage (TBD) of the premium, and at least a certain dollar amount (TBD). Any employer that did not would pay a new tax. Again, the amount and structure of the tax is left to the discretion of the Secretaries of Treasury and HHS. Small employers (TBD) would be exempt.
The emphasis is mine.
Definitions are important but according to the Small Business Administration a “small business” is one with 500 or fewer employees. Even if you restrict the discussion to truly small businesses, those with fewer than 20 employees, those businesses account for 20% of the private sector employees and small businesses have accounted for between 60% and 80% of new jobs in recent years.
Whether they’re excluded from the bill or not any mandatory insurance plan, individual mandate or employer mandate, will be a harsh blow to small businesses.
If the definition is broad enough to include anything but companies with more than one or two employees, it will impose a hefty, new payroll tax on all but the very smallest concerns. If it doesn’t include them, the mandate will fall on the concerns’ employees. That will place a tax on those who work for small companies that won’t fall on those who work for larger ones.
Not only is this an effective subsidy for larger businesses but it betrays a lack of understanding of the ways in which the American economy has changed over the years. Very few large businesses have advertising departments, legal departments, and so on any more. Most large businesses today are actually virtual businesses consisting of complex webs of small and medium businesses who perform many of the functions that were once performed inhouse.
This underscores a point I’ve been making for a long time here. Most of our Congressmen are lifetime apparatchiks. Those who have worked for small or even medium-sized companies are very few. Many have never worked for anything but the government and know little or nothing about the way things really work in the United States today. Many of their advisors are twenty-somethings for whom working for a Congressmen is their first job.
Unless they’re very careful their ignorance will throw us back to the 1950’s with the productivity of the 1950’s.
Most regulatory laws kick in at 15 employees, that’s the civil rights laws, the Americans with disabilities act, and Obama implied that would be the line during the campaign. I could search the reference, but I won’t since I don’t think Obama is necessarily “bound” by it anyway. The policy logic goes to 15, but I do wonder if contribution requirements might be staggered. I think the 500 employee number is used for government pork and for lobbying purposes.
The size doesn’t bother me, per se, as much as the notion that there are a number of businesses that employ people who work hard, but don’t bring enough money in by their own efforts to pay the insurance. And smaller companies pay more for insurance that the larger companies with leverage to negotiate with insurance companies.
Mandatory family coverage that includes children up to age 26? Egad, I’m not liking the sound of the future American economy. Five G.M. cars for every garage and two unemployed young adults living in every basement.
But we’ll have the most prosperous retired auto workers of any country in the world.
“But we’ll have the most prosperous retired auto workers of any country in the world.”
….and the worst compensated capital providers to the auto industry in the world…
They won’t forget.
Hey the Dems just came out with a draft of a health reform plan about half an hour ago. Waiting for your analysis, Schuler.
Come on, tick tock. I don’t have all day.
Didn’t Dave just ousource his analyis of the Democratic plan to a Bush economic operative typing from an undisclosed location in Guadalajara? Or is there a new one?
Essentially, I’ve been analyzing healthcare plans for the last four years here. The plan is heavy on mandates, light on cost control, heavy on expanding coverage, light on expanding the supply to provide care for the additional people who’ll come onto the health insurance rolls.
I’m concerned that it will be very hard on small business. I’m concerned that cost reductions will never materialize.
PD, large companies are often self-insured, with insurance on the backside to cover very large claims. Of course, they use the insurance companies for their administrative abilities and they do get negotiation benefits, often from the local hospital networks.
And Dave, you seem to be assuming that the (likely) damage to small employers isn’t intentional. They want to wreck small business to drive the employees to larger companies that will be easier to unionize and to bully.
Yes, I always presume stupidity over malice.
Thanks for reminding me of self-insurance. Twenty-five or thirty years ago there was a wave of companies, large and medium, that changed to self-insurance IIRC that’s prohibited under the Congress’s plan. That means that companies of nearly every size are going to see higher costs.
One of the plans prohibits self-insurance for less than 250 employees. I meant to mention that as another potential dividing line for small employees.
I’m aware of self-insurance, I might even be in a plan that is partly self-insured through my wife’s employer, which is a hospital. I am not on my own small business’s health care plan.
Yes, I always presume stupidity over malice.
That comes forth with me. I assume, in assending order:
(4) Stupidity;
(3) Malice;
(2) Malicious stupidity;
(1) Stupid maliciousness.
Ignorance is taken as a given in all cases. But then I have been accused of being an idealist….
Dave & PD, it’s good to see that the Administration and Congress are doing what they can to insure HIGHER costs by damaging slef-insured plans. (Insure? Ensure? Whatever.) Eventually they will claim that exploding costs of the private plans dictate that the government take over the entire healthcare industry. But for now, small steps!