What U.S. Small Businesses Need in Healthcare

Emergency healthcare reform for small businessesIf you run or work in a small business here in the United States, you’ve probably been hearing about “healthcare reform” for months. (And if you’re from another country, you probably wonder why we can’t get our act together here in the States when it comes to healthcare … but I digress.)

Well, a healthcare reform bill (PDF) is finally here in Congress, in the House of Representatives. Of course, you might wish it weren’t here, when you hear what’s in it.

If it goes through in its current form, it would add a significant burden and cost to small businesses.  If your business has more than $400,000 in payroll, you’d have to provide health insurance or pay a penalty of 8% of payroll.  A business with $250,000 – $400,000 in payroll would have to pay a penalty of 2% to 4% 6% of payroll. (Editor’s note: corrected my typo: the graduated penalty is 2 to 6%, not 2 to 4%.)

The House bill also socks it to higher income earners — those with at least $350,000 in adjusted gross  income if filing jointly.

In essence, it puts a disproportionate amount of the cost of healthcare on employers and a narrow segment of the population.

Three of the nation’s largest and most respected small business organizations have come together and issued a joint letter about healthcare reform. Of special concern is that the current bill includes “employer mandates” which would require employers to provide health insurance to employees. Here’s the joint letter issued by NASE, NFIB, and NSBA (emphasis added):

July 15, 2009

As lawmakers work to address the healthcare affordability crisis facing our country, our organizations are writing to urge you to remember that our nation’s small businesses and the self-employed share a problem that plagues all of our members: the soaring cost of healthcare. Similarly, our members share the strong desire to enact reforms that improve access and affordability for themselves, their employees and their families.

For too many small business owners, healthcare is one of their fastest growing and most unpredictable costs. Since 1999, health insurance costs for small firms have increased 113 percent. In spite of the increases, the ever-escalating cost does not correlate with increased healthcare benefits. Instead, employees in our nation’s smallest firms pay an average of 18 percent more in health insurance premiums for the same benefits as the largest firms.

Congress can take immediate action to increase access to quality, affordable health insurance. As both purchasers and consumers of care, small businesses and the self-employed believe reform should achieve at least four goals:

  • Instituting insurance market reforms that increase access, expand choice, and spur competition for private insurance;
  • Creating marketplaces that provide greater transparency and efficient approaches for purchasing insurance;
  • Providing equity in tax treatment – regardless of how or where insurance is purchased; and
  • Improving affordability and providing for sustainable cost containment by eliminating wasteful spending in the overall healthcare system.

While our organizations and the members we represent agree that the status quo is unsustainable, it is critical to emphasize that not just any reform will do. As the country’s largest, oldest and most respected small business associations, we are dedicated to bringing the kind of reform small businesses truly need and will support reforms that improve, rather than worsen, the current situation for our nation’s job creators. During these challenging economic times, we are especially concerned about employer mandates, including those veiled as pay-or-play and payroll tax approaches. These tactics will seriously impair the capacity of small businesses to create jobs – and would do so at the very moment the country struggles to climb out of a deep recession. Some studies suggest that an employer mandate would result in roughly 1 million lost jobs occurring in the small business community, creating even greater economic harm to our country.

Congress can provide tools to create a competitive, innovative healthcare system that brings private, affordable coverage within reach of all Americans. That system can be created by instituting meaningful reforms that both preserve and promote the viability of America’s entrepreneurs. We are eager to work with you and your colleagues and are hopeful that the policy priorities put forth in the healthcare reform debate will reflect the priorities of America’s job creators.


Robert Hughes
President, National Association for the Self-Employed

Dan Danner
President, National Federation of Independent Business

Todd McCrackin
President, National Small Business Association


Anita Campbell - CEO

Anita Campbell Anita Campbell is the Founder and Publisher of Small Business Trends and has been following trends in small businesses since 2003. She is the owner of BizSugar, a social media site for small businesses, and also serves as CEO of TweakYourBiz.com.

11 Reactions

  1. Martin Lindeskog

    When is time for free choice in medicine in America? As I said a couple of times before, support the organizations that are fighting for individual rights, e.g., Freedom and Individual Rights in Medicine (WeStandFirm.org) and Americans for Free Choice in Medicine (AFCM.org).

    Anita, Thanks for your report on the situation. It is good for me to know as a preparation for my return to America. I remember how a big company could help the employees with the healthcare coverage and deduct it from your payroll in a favorable way. But I bet it was lot of administration to go through for the company.

    My friend @NYCthinker wrote the following tweet some days ago:

    “Individual Health Savings Accounts in NYC? Anyone signed up? Experiences? My monthly health insurance payment is up 30% over 3-4 years.”

    I have to write a follow-up to my post, The Best Place To Get Well, in the near future…

  2. What a disingenuous post. Nothing but a shill for the insurance companies.

    Do you really think that the Insurance companies will actually start to cover people with preexisting conditions or drop their program of rescission?

    “Executives of three of the nation’s largest health insurers told federal lawmakers in Washington on Tuesday that they would continue canceling medical coverage for some sick policyholders, despite withering criticism from Republican and Democratic members of Congress who decried the practice as unfair and abusive. ”


    Lets see: I have a small company with three employees. Approx. payroll; $90,000. Blue Cross will cover two of them for $550.00 per month. The other one has “preexisting conditions”. My cost to cover two of them $1,100.00 per month and they could be canceled at any time they get a major illness. (rescission)

    Or… I could pay 2 to 4 % of payroll $1800 to 3600 per year.

    Lets see….. $150 to $300 a month and they could get their own insurance and all three are covered?

    What am I missing here.

    The fact that I’m not a “Small Business” with 300 employees and a million dollar payroll?

    A Public Plan is Mandatory. 70% of the population agrees.

  3. Anita Campbell



    What’s disingenuous about this post? You misunderstood the post.

    I am against employer mandates. I think it makes no sense at all to keep healthcare as an employer-related issue. Also, the letter from 3 small-business groups is news, and if you look at the sentence I bolded, you will see that they are against employer mandates.

    Please re-read the post.

    – Anita

  4. Allow me to play devil’s advocate:

    When did health care insurance become a universal right?

    If your employer doesn’t provide health care benefits shouldn’t you have figured that into the offer when you accepted it?

    Is the government really the organization we want running the health care industry?

  5. I think the argument of “severe burden on Small Business” is totally superficial, because most businesses will adjust that extra cost by reducing the payroll. Note that the policy applies to each and every company, so it doesn’t put any single company (within US) at a competitive disadvantage. What it does do is allow (almost) everyone to have health care. The economic benefits of universal health care is well understood and the only people who have complaints about it are those working for the Insurance company.

  6. Anita, The lack of support of a Public plan and the call for a “system that brings private, affordable coverage” leaves us still open to the rescission ability the Insurance companies use to drop coverage on someone who gets sick.

    The insurance companies will never offer a low cost plan on their own.

    Oh, I take that back. Here in Florida the state had the insurance companies offer low cost plans and they are a joke. For only $150 month you can see your doctor it comes with a $1000 annual deduction and a minimal copay but… there is no hospital coverage!

    I will agree with you on the need for affordable health care without a great burden on Small Businesses. The burden as shown isn’t much burden for the potential results.

    Me and the other 47 Million uninsured US citizens could be covered! I just simply don’t think it can be done without some form of competition with the Insurance Companies.

    Why are they spending $1.4 Million a day if it isn’t in their welfare to keep the status quo?

  7. I suggested that even you are in small business we deserve to have a health insurance which is fit for our payments but we can depend on in times of sickness…

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