As we continue NFIB’s series on issues that are plaguing small business owners…from our folks in DC…today’s topic is health care costs.
WASHINGTON, D.C., May 22, 2012 — As the nation formally recognizes the important role that small business plays in our economy during Small Business Week, the National Federation of Independent Business (NFIB) today highlights that health-care costs continue to remain a top concern for small-business owners despite the new health-care law.
“For over twenty years, health-care costs have consistently remained a top concern for small-business owners and the new health-care law will continue to increase the cost burden for small-business owners who provide coverage for their employees,” said Susan Eckerly, Senior Vice President of Federal Public Policy. “Over the last two years, we have seen what does not work in health-care reform, and by turning a blind eye to lowering costs, health-care costs are forecasted to continue to rise, especially for small-business owners. There are solutions to address the high cost of health care, but Congress needs to act and act now.”
Solutions to Lower Small-Business Health-Care Costs:
- Defined Contribution Plans: Make health insurance simple for both employers and employees. A pre-tax dollar amount is provided by the employer to the employee and the employee makes the choices about their own health-care plan. Small businesses generally lack health insurance expertise, human resources and market power. They would like the option of contributing dollars to employees’ health insurance without actively choosing, purchasing or managing the plan and the defined contribution option provides this cost-effective flexibility.
- Equal Tax Treatment in Individual Market: Tax breaks available in the employer-sponsored market should be available in the individual market, where many small businesses and the self-employed purchase coverage. Currently, the U.S. Tax Code favors employer-sponsored insurance and discourages individual purchases. Employees can only use pre-tax dollars for insurance if their employers choose, purchase and administer their insurance policies which creates several well-documented problems: the individual market is small; administering health insurance distracts employers from their core businesses; the employee/insurance nexus creates “job lock”, where employees cannot leave a job for fear of losing health insurance; with employees unable to shop around, insurance is less competitive; differences in tax treatment should not determine whether a person secures health insurance in the workplace or on their own.
- Insurance Portability: People should be able to move from one job to another, between a job and no job, and from state to state without losing insurance coverage or encountering excessive cost increases for changing. Because the health-care system is dominated by employer-sponsored, insurance portability is a consistent problem. Insurance laws should make it possible for those who maintain their coverage to continue doing so after changing jobs or stopping work altogether.
- Interstate Markets for Health Insurance: Small businesses and individuals should be able to pool risks and purchase insurance across state lines. Large businesses, labor unions and governments generally self-insure, so under federal ERISA law, they can pool their risks across state lines. This allows them to develop larger, more stable risk pools, thereby lowering costs and reducing uncertainty. The fully-insured market (mostly small businesses and individual purchasers) has no such ability to pool risks across state lines. An interstate market would also provide a check on overzealous state regulations by offering out-of-state options to purchasers.
- Malpractice Reform: Medical liability laws should limit non-economic damages, rationalize economic penalties for malpractice, and offer options for arbitration and no-fault malpractice insurance. Through excessive malpractice judgments, we penalize good doctors practicing good medicine, when their patients happen to experience bad outcomes. At the same time, most patients who suffer actual acts of malpractice are never compensated. This incoherent system raises costs and damages doctor-patient relationships.