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Thursday, November 12, 2009

How Small Business Will Suffer With "Obamacare"

SMALL BUSINESS HAS fought the health-care bill as too costly.

That made Saturday's vote bitter to many of the nation's roughly 30 million such entrepreneurs, if welcome to some."With unemployment at a 26-year high, the punitive employer mandates and atrocious new taxes will force small business owners to eliminate jobs and freeze expansion plans at a time when our nation's economy needs small business to thrive," Susan Eckerly, senior vice president of one of the most powerful small-business lobbying groups, the National Federation of Independent Business, said in a statement Saturday.Added Molly Brogan, spokeswoman for the National Small Business Association: "We have serious concerns about the bill's cost-containment and the long-term implications of the employer mandate and the surcharge tax."

Action now shifts to the Senate, and with many specifics still in doubt, small-business groups are planning to lobby heavily there.The House bill mandates that employers with payrolls above $500,000 must contribute -- for each full-time employee -- 72.5% of the premium cost for single coverage and 65% of the premium cost for family coverage. The penalty for failing to do so is a 2%-to-6% tax on employers with payrolls between $500,000 and $750,000 and an 8% tax for employers with payrolls above $750,000.

The Senate, by contrast, has bills that don't have employer mandates but are highly focused on provisions that give tax credits to those that do contribute to premium costs. One bill from the Committee on Health, Education, Labor and Pensions rewards employers for paying more than 60% of their employees' premiums with tax credits of as much as $1,000 for each single-coverage employee and as much as $2,000 for each family-coverage employee.

Outside Washington, meanwhile, small-business owners are weighing their options and responses.Sharon Evans, chief executive of CFJ Manufacturing Inc., a promotional-products company in Fort Worth, Texas, said she pays 65% of health-insurance premiums for her 100 employees. If she were mandated to pick up more of the cost, as the House bill requires, she said she would consider dropping insurance and paying a penalty. And various tax rebates, as envisioned by prominent other versions, don't necessarily pass muster with her."If you're going to make me pay $100,000 to get everybody insured and you give me an $8,000 tax rebate, well, the answer to that is, pardon my French, 'Hell, no,' " she said. "That's not going to help me out."

Carolyn Morse, president of Powerlung Inc., a Houston medical-device manufacturer, said she hopes a tax credit would help alleviate the cost of paying 100% of health-care expenses for her six employees."I would be in a better position to maintain a status quo, rather than go to my employees and say, 'Guys, you're going to have to pay,' " Ms. Morse said.Under all the bills in Congress right now, Ms. Morse's health insurance would be subsidized, but the amount she would receive would vary based on the amount of the premiums.

The House bill provides that employers with fewer than 10 workers who average an annual wage of $20,000 or less get a full credit of 50% of premium costs. That credit amount decreases as employee count and average salary increases, becoming null once the employee count hits 25 or the average salary hits $40,000.Currently, many employers who don't offer health insurance blame the cost-prohibitive premiums. And those who do say expensive insurance is hindering expansion and hiring.

Premiums for single policies rose 74% for small businesses in the past eight years, a 2009 Kaiser Family Foundation survey found. Firms with fewer than 200 workers are expected to pay an average of $12,696 for family-plan premiums and $4,717 for single-person premiums this year.The price of health insurance is a big concern for Mike Draper, president of Smash, a print-screening and design firm in Des Moines, Iowa. Unlike some business owners, Mr. Draper, who pays 100% of the premiums for his 15 workers, supports a mandate requiring employers to provide health insurance -- as long as small companies get to offer better insurance plans at a more attractive price."If the government offers to pay for 50% of my insurance, I'll say 'sure,' " Mr. Draper said. "But from a macro level, I don't see how that will bring cost down -- that's just selling the same crap but subsidizing it."

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