An Issue Brief released yesterday by the Robert Woods Johnson Foundation (RWJF) concludes that small firms would largely benefit from the reform efforts that have been put forth in both the Senate bill (HR 3590) and the House bill (HR 3200). While the benefits from these bills to small businesses already are uncertain – and likely even deleterious – the latest version of the senate bill is even less likely to result in actual benefits for small employers.
Previous Heritage analysis has shown that small businesses would be affected by employer mandate structure under the House bill (HR 3200) and the cost-impact of this “pay or play” mandate is not trivial as the aforementioned RWJF Issue Brief purports. These mandates would effectively reach small firms with less than 25 workers—all small firms with, on average, between 21 and 25 workers— which are the small businesses that are supposed to reap the benefits of reform.
Alternatively, the latest version of the Senate Health bill (HR 3590) largely leaves small businesses out of any employer “pay or play” mandate provisions. The bill also includes tax credits for small employers to alleviate the cost-pressure of offering insurance to its workers. After exclusions, however, essentially the only eligible firms are those firms with 10 or fewer workers as well as those with low-income workers—the least likely to offer coverage even with a significant price reduction.
In addition to the coverage mandate costs and tax credits, it is not certain that there will be any benefits particularly in the latest Senate Health bill relating to insurance cost reduction for small employers—as a result of the established state health exchanges. Even before the latest concerns relating to the negotiation process to get any type of health reform bill, it was still uncertain whether the premiums even in the state health insurance exchanges would result in lower premiums. The plans purchased in these exchanges would have to meet a regulated level of coverage requirements, which could very likely contribute to even higher costs. If small employers continue to find health insurance costs unpredictable as well as less of a direct cost-burden then they are likely to remain outside of even these exchanges. This has largely been the situation in Maine, where only 2.5 percent of total small employers actually purchased health insurance coverage through the established public option plan—DirigoChoice.
It is also uncertain whether small firms will determine it worthwhile to participate in the established health exchanges. This could occur for any number of reasons. Although the burden of administration costs is currently high for small employers in the individual and small group markets, it is not certain that these costs will be lower when having to comply with bureaucratic regulations. Small businesses, particularly the smallest companies, largely do not have the capacity to take on the administrative complexities of managing health insurance. This is a legitimate and reasonable concern that small employers will still face, all else equal, especially for those firms that would have to hire an additional worker to handle the additional administrative functions of handling the health insurance plans and compliance regulations.
Overall, it is highly uncertain whether the House bill (HR 3200) or any version of the Senate bill (3590) would “substantially improve the ability of small employers to obtain affordable coverage”, particularly considering the continued uncertainty of premium costs small employers will face even in the (to be established) state health insurance exchanges.