Small Biz Health Care Daily: New York Costs for All

New York ranks among the most costly states in most things – especially things tied to government spending, regulation and taxation. That includes health care coverage. New York regulates, and costs escalate.

A November 12 op-ed from The Wall Street Journal by an independent businessman – a writer – living in New York makes some critical points about the national health care debate.

Andrew Heinze noted:

• I'm a registered Democrat living in New York City, and I buy my own health insurance. But now, having seen the health-care reform bill that passed the House, I'm preparing for life without health insurance.

• Before I come to the big question—why will I lose this insurance plan if anything like the House bill becomes law?—I want to address a smaller one. Why do I choose the Empire "Tradition Plus" plan instead of a comprehensive HMO-type plan that covers physician fees, prescriptions, etc.? Because, unlike other states, New York already mandates two things that the current federal health-care reform will mandate. The first mandate prohibits insurers from denying coverage because of a pre-existing medical condition. The second mandate prohibits insurers from denying coverage, or determining prices, based on age. The result is that HMO plans in the state are now very expensive.

• The House health-care reform bill hinges on what it calls a "qualified" health-care plan. Individuals will be required by law either to buy a plan that meets the criteria of a qualified health-care plan or pay a fine. What are those criteria? They're the basic components of a comprehensive HMO-type plan, which means that Empire's "Tradition Plus" will not qualify because it covers only hospital costs. In other words, if President Obama signs into law the kind of health-care reform bill that is currently on the table, I will have only two choices: buy an expensive qualified plan or pay a fine for being uninsured.

Heinze also noted that there is nothing in ObamaCare that would reduce his costs in New York. Instead, New York’s misguided regulatory costs would spread elsewhere. Does the rest of the nation really want to be like New York?

Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council

Small Biz Health Care Daily: ObamaCare and Small Business

Despite opposition from the business community and ever-mounting concerns from consumers (who are voters and taxpayers as well), the Obama White House and congressional leaders keep pushing ahead with big government health care.

Even though these politicians continue to claim that these measures would be good for small business, in reality, the problems for small businesses would be formidable, including facing new mandates and taxes, and higher costs.

Sally Pipes, author of The Top Ten Myths of American Health Care, wrote a piece for the November 6 Investor’s Business Daily titled “Health Reform Would Bury Small Business.” She noted the following:

• Several new studies show that ObamaCare will dramatically increase health costs for most small businesses.

• One study relied on actuarial data from WellPoint, a large health insurer that provided customer data in 14 states where it operates Blue Cross plans. The report concluded that 70% of small businesses would experience higher health insurance premiums if the Democrats' health plan passes.

• … a different study, produced by Blue Cross Blue Shield and the consulting firm Oliver Wyman … estimated that the average small business would experience a 19% jump in premiums within the first five years of ObamaCare's passage.

• A third study, from America's Health Insurance Plans and PricewaterhouseCoopers, found that the reform bill approved by the Senate Finance Committee would result in a 28% increase in premiums for firms with fewer than 50 workers by 2019.

Why would this be the case? A key issue that Pipes highlights is the imposition of new mandates and regulations that would raise the cost of health insurance.

What does that mean for small businesses? Pipes writes: “Managers would likely compensate for these new costs by discontinuing health benefits, cutting wages, holding off on new hires or even laying off workers. Can the Democrats' efforts really be called ‘reform’ if they'd leave workers and businesses alike worse off?”

Good question.

Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council

Bank to Expand Small Biz Lending

The story on credit for small business has been a tough one for some time now. Either small businesses are not expending and borrowing due to their economic outlook, or they are finding it hard to get credit.

So, a November 10 Reuters report is a welcome signal.

Reuters noted that JPMorgan Chase & Co. is going to increase its small business lending by $4 billion this year, while adding 300 bankers to serve the small business community. In total, the plan is to boost lending by $10 billion for firms with annual sales of less than $20 million, with 325 new bankers targeted at this group.

For good measure, Reuters noted that JPMorgan back in the summer repaid the $25 billion it received in TARP money.

These are positive developments in a tough climate for small business. Small business is critical to our economic recovery, not government stimulus or bailout efforts. Indeed, the key right now is to get bad government policies out of the way, along with the commensurate costs and uncertainties, so the private sector can get to work building, investing and innovating. Efforts like that announced by JPMorgan are big plusses.

Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council

Small Biz Health Care Daily: House Health Care Bill, the States and Small Business

The health care bill that passed the U.S. House of Representatives by a vote of 220-215 over the weekend would create enormous problems for consumers, small businesses and health care in general. But what about the states?

The Concord Monitor reported on November 10 that Republicans in New Hampshire argue that this federal legislation would hurt the state’s budget.

The paper reported:

• Flanked by about 15 legislative leaders, former Health and Human Services commissioner John Stephen told the press yesterday that the health care reform bill just passed by the U.S. House "will be devastating to state budgets." The bill must still pass the U.S. Senate, and Stephen urged the state's senators to vote against it.

"This will lead New Hampshire down the road of a sales or income tax," Stephen said. "These are called unfunded mandates, and we can't afford them."

• The state has about 142,500 uninsured residents. Stephen said the bill will force states to expand efforts to enroll people in Medicaid who are eligible for coverage but have chosen not to sign up. That could cost $434 million over the next 10 years. Stephen estimated the state will pay an additional $111 million over six years, beginning in 2015, to pay for expanded Medicaid coverage for healthy adults making up to 150 percent of the federal poverty limit. The bill would also restructure the "disproportionate share hospital" program, which reimburses states for charitable care, which could cost the state $157 million in 2017 and slightly more in the following years. In total, Stephen argued that the state could lose $1.2 billion under the House bill. The state would also be prohibited from reducing Medicaid eligibility or benefits.

Of course, jacking up health program costs at the state level would be more bad news for entrepreneurs, investors, small businesses and the economy, as taxes would rise in the states on top of the many and varied tax increases the House bill itself would impose on the entrepreneurial sector of our economy. As these legislative leaders noted, New Hampshire could face the imposition of sales and/or income taxes, which would diminish the state’s competitiveness, and impose serious costs on small business.

Raymond J. Keating

Chief Economist

Small Business & Entrepreneurship Council

Small Biz Health Care Daily: From the House to the Senate Trigger

The House health care bill – which barely passed by a vote of 220-215 over the weekend – was aptly dubbed as “The Worst Bill Ever” by The Wall Street Journal’s editorial page. The measure would jack up taxes (particularly on entrepreneurs and investors), impose coverage mandates and penalties (more taxes) on individuals and businesses, impose regulations and mandates on insurers, send government spending skyrocketing, create a new, expensive government health care plan program, and more.

This, of course, is a recipe for health care disaster – namely, out-of-control costs, diminished quality of care, price controls and rationing, and even higher taxes.

Now, things move to the U.S. Senate, where what’s being debated is still a dangerous mess.

At least one of the items that passed the House is causing considerable debate in the Senate, that is, the government health insurance plan. The Senate is considering a “trigger” option on a government insurance plan.

The Associated Press reported:

Republican Sen. Olympia Snowe of Maine, who voted for a version of the Senate bill in committee, has given the Democrats a possible way out. She's proposing to allow a government plan, if after a few years premiums keep escalating and local health insurance markets remain in the grip of a few big companies. This is the "trigger" option. That approach appeals to moderates such as Sen. Mary Landrieu, D-La. "If the private market fails to reform, there would be a fallback position," Landrieu said last week. "It should be triggered by choice and affordability, not by political whim."

Of course, all this would do is delay the government plan for a short period of time. After all, this is not about market failure; it’s about government policy failure.

Costs are not going to decline, but instead increase under this kind of proposal due to more regulation and mandates, and higher taxes. The effort itself assures that costs are going to rise, which in turn, assures that the public option “trigger” will be pulled. That, in turn, means costs being pushed even higher, and private firms being pushed aside.

It’s fitting that the word “trigger” is being used in this discussion. The entire effort seems designed to kill the U.S. health care system – like pointing a policy gun at the best health care system in the world, and many politicians ready to pull the trigger. The House has fired a shot, and now the Senate has to decide if it is going to join in, or put the policy gun down and pull back from this dangerous game.

Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council

Small Biz Health Care Daily: House Republican Alternative on Health Care

The Democratic leadership in the U.S. House of Representatives plans to vote on its health care package on Saturday (November 7). If it passes, perhaps the vote will become known as the “Saturday Political Massacre,” as small businesses and their employees, health care consumers and providers, and the U.S. economy will be savaged by misguided politics overriding sound economics.

But there is an alternative.

House Republicans have announced a health care plan that points in a far different and more productive direction. The GOP plan features:

• boosting competition and choice by creating a nationwide insurance marketplace, allowing for health insurance purchases across state lines;

• helping small businesses by allowing them to pool together to gain access to lower cost insurance coverage;

• implementing medical liability reforms to bring down the costs of junk lawsuits and defensive medicine;

• allowing qualified participants to use funds in health savings accounts to pay the premiums for high deductible health insurance plans;

• expanding and reforming high-risk pools in order to expand insurance coverage to those with pre-existing conditions.

Rather than expanding the size and reach of government in health care, these proposals actually would enhance competition and choice in health care.

If people truly think that more government will somehow reduce costs and boost the quality of care – contrary to what economics and history teach – then they should support the plan pushed by House Democratic leaders and President Obama. But if they think that more competition and choice in the private marketplace is the right answer – again, as economics and history teach – then the House Republican plan is worthy of support.

Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council

Small Biz Health Care Daily: The Small Business Tax Credit Head Fake

President Obama and congressional leaders have been working hard to sell the idea that big government health care reform will somehow be good for small business. In particular, more government mandates, regulation, spending and taxing are supposed to lead to reduced costs for overburdened businesses.

On October 29, for example, the President declared the following to business owners: “What we will do is make the coverage that you're currently providing more affordable by offering a tax credit to small businesses that are trying to do the right thing and provide coverage for their employees. Under the House and Senate bills, millions of small businesses would be eligible for a tax credit of up to 50 percent of their premiums. That's in the legislation that's already been proposed.”

Sound too good to be true? Well, of course, it is.

First, this tax credit is limited to two years for any business. So much for any substantive, permanent reductions in cost.

Second, the credit is applicable to employers paying average compensation of $20,000 a year, and phased out for average incomes up to $40,000. Above that level, no credit is available.

Third, the credit is limited to firms with only 10 or fewer employees, and then being phased down up to 25 employees. No credit would be available beyond that level.

This is a temporary, highly targeted tax credit that amounts to nothing substantive for small businesses and for making health care more affordable. Instead, it’s a political head fake – a political move that simply tries to fool some small business owners into supporting this costly, misguided legislation.

Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council

Small Biz Health Care Daily: By the Way, the People on Health Care Reform

As President Obama and congressional Democrats continue to relentlessly and recklessly push the nation further down the road of big government health care, it is worth taking a moment to see how this effort is doing among the people.

Rasmussen Reports released its latest numbers on health care reform favored by the President and Democratic leaders in Congress on November 2.

It turns out that 54% are opposed to the effort and 42% favor it. That’s quite a change from late June when 50% were in favor and 45% opposed.

For good measure, 55% expect the plan to increase costs (23% saying it would reduce costs), and 52% agreeing that it would hurt the quality of care (with only 27% expecting an improvement in care).

The sentiments of a majority of American voters are right on target in this case. The reality is that more government involvement inevitably will lead to increased costs and diminished quality of care. That’s always the case with more government. After all, what incentives exist in government for efficiency and excellence? None.

Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council