Why health care reform is needed for small business owners

The attention of public has been concentrated for a while now on the ongoing debates on what the health care reform will bring. By now we are all familiar with the horrifying facts about the number of Americans without coverage, and the fact that almost 50% of 47 million currently uninsured are employed or dependent on small companies.

Small business, being the major job creator in the States, has a critical place in the health care reform debate. The utterly poor state the small businesses find themselves in when it comes to health care coverage is what’s causing them to constantly re-question the proposed reform. The main issue for all companies, and especially the small ones are raising health care costs which repeatedly lead to job losses in many industries. The fact that health care premiums have doubled in past nine years speaks for itself. Small businesses pay 18% more per employee than large companies for the same health insurance policies. The reason being they have a smaller risk pool and have to pay higher broker fees and administrative costs per employee. That is the main reason why only 49% of firms with less than 10 workers offer health coverage. The money spent on health care coverage could be spent on much needed investments, research and development, but instead the innovation that small business brings is standing frozen. The small percentage of small firms that do provide coverage are cornered to cut costs elsewhere which at the end keeps them from growing.

The promise from the White House is that the proposed health care reform would reduce the current burdens on small business. One of the principals that would be used to achieve this is an “insurance exchange” which would allow small business to purchase health insurance choosing from a number plans that would provide better coverage at lower costs than they could find in the current small group market. According to the current draft legislation, many small businesses that provide coverage for their employees would receive a small business tax credit as a way to encourage coverage. Also, the creation of an insurance exchange would provide better options for employees of small firms that do not offer health insurance. Health insurers also would not be allowed to screen potential enrollees for pre-existing conditions. At the end, the proposed reform would boost creation of new companies and increase the number of workers willing to work for small firms, and would also reduce the “job lock” phenomenon in which workers hesitate to leave a job with employer-sponsored health insurance out of fear that they will not be able to find affordable coverage.