Now’s the time for small businesses to focus on the health care debate. The legislative drama that will continue to unfold in the nation’s capitol over the next few weeks could determine whether small businesses in Greater Madison will have the wherewithal to affordably provide health insurance to their employees.
Three major bills have been put forward to reform the nation’s $2.5 trillion health care system, and the ultimate measure is likely to be a combination of the three. They have certain things in common, but take different approaches with regard to how small businesses would help finance this transformation.
IB discussed the business impacts with attorney Michael Skindrud, chair of the Health Care Practice Group in the Madison office of Godfrey & Kahn.
Bill, Bills, Bills
The Senate Finance Committee will vote on its bill (the so-called Baucus bill named for Montana Senator Max Baucus) this week, and that bill will join bills of the Senate Health, Education, Labor, and Pensions Committee for Senate debate. The full House of Representatives already has reported its bill out of committee.
Floor debates in both houses of Congress could begin about mid-October on all three bills, and conference committee negotiations would follow.
Each bill would require individuals to purchase insurance or pay a fee or fines, each prohibits health insurance companies from denying coverage for pre-existing conditions, and each bill has minimum requirements for the design of benefit plans. For example, each bill eliminates co-pays for preventive care provided by physicians, which is not now paid by Medicare and many insurers.
The Baucus Plan
The Baucus bill sets up a national exchange where individuals, the self-employed, and small businesses can shop for health insurance. For the purpose of shopping on the exchange, small businesses are defined as companies with up to 100 employees.
The other bills contain provisions to establish a government-run option to compete with private plans, the so-called “public option.”
These measures tend to vary in terms of how they impact the bottom line of small businesses, but each contains a combination of “carrots and sticks,” noted Skindrud.
The Baucus plan, which is considered by some to be the least onerous on employers, does not mandate that employers provide insurance, but it does feature tax credits and penalties. Businesses of 25 or fewer employees whose workforce averages less than $40,000 per year in wages would be eligible for tax credits of as much as 35% of the cost of coverage.
According to Skindrud, the problem with the tax credits is that they are fairly modest and they are tied to a complicated formula that employers may prefer not to wrestle with.
Meanwhile, employers with more than 50 full-time workers that don’t offer health insurance would pay a $400 fee for each worker that applies for federal tax credits to buy coverage.
In addition, the Baucus bill would charge fees to insurance companies, drug makers, and medical device manufacturers.
The House Bill
The House bill and the Senate Health Committee bill each have pay-to-play provisions, but with different thresholds.
The House bill would require all employers with payrolls of $250,000 or more to contribute 72.5% of their worker’s premiums, 65% for family coverage, or cough up a percentage of their payroll as a charge to the government. That penalty would range from 2% to 8% depending on the size of the payroll, but it starts at 2% for companies with a payroll of $250,000.
Companies with a payroll over $400,000 would have to cover 72.5% of workers’ premiums or face an 8% penalty.
Small employers with low-income employees would be eligible for a tax credit to be applied to insurance premium costs.
For the self-employed, a sliding scale of federal subsidies would prevent individuals from paying more than 11% of their income on health insurance.
The Senate Health Committee Bill
The Senate Health Committee bill provides an incentive for employers with 50 or fewer full-time employees. Those that cover at least 60% of their employee’s premiums would receive tax credits to offset the cost of coverage. Companies with more than 25 workers that cover less than 60% of their premiums would pay a $750 annual penalty for each employee of full-time equivalency.
To secure more affordable insurance, small businesses and self-employed individuals would be allowed to join statewide purchasing pools.
Public Options?
As far as the so-called public plan that critics say will lead to a complete government takeover of health care, Skindrud does not see either the House or Senate public plan destroying private insurance, and he points to a New England Journal of Medicine report which indicates that a majority of physicians favor a mix of public and private options.
The Baucus bill would create nonprofit, member-owned co-ops to compete with private insurers, but it also has a more narrowly targeted public plan option thanks to an amendment by Sen. Maria Cantwell, D-Washington. That more narrow public plan alternative, introduced after a broader public plan failed to gain enough support, would let states voluntarily offer a plan to provide coverage for persons making too much to quality for Medicaid, but less than 200% of the federal poverty level (approximately $44,000 for a family of four).
These plans typically offer economically disadvantaged people a choice among several different private insurance carriers, but instead of having costs shared by the federal and state governments, Cantwell’s plan would be fully financed by the federal government.
Keeping Watch
As the Congressional debate unfolds this month, the final measure will begin to emerge. “This has been quite a dramatic and fascinating debate,” Skindrud said, “and that’s likely to continue over the next few weeks.”
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