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  • The House Health Care Bill: Sticking it to Small Business

    While the nation’s unemployment rate continues to linger around 10%, Congress will soon return to Washington to devise a way to get a health care bill passed by both the House and Senate. As the negotiations loom, a recent paper by Heritage’s John Ligon explores the devastating effects that the employer mandate in the House health care bill would have for small business.

    In order to pressure more businesses into providing health care for their employees, the House bill includes an incremental payroll tax on employers that fail to do so. This tax starts at 2% for employers with total annual payroll of $500,000 and increases to 8% on total annual payroll of $750,000 or more. This tax would affect all employers, even those with 25 employees or fewer, since it is based on total payroll, not number of employees.

    This tax will add significantly to small business expenditures, regardless of whether they choose to offer health benefits to their employees or not. According to the bill, if employers do offer benefits, they cannot come out of employee’s wages, and they must meet the federal requirements concerning covered benefits. If they choose not to add health care to their expenses, small businesses will instead pay the tax.

    However, the structure of the tax causes it to go further than acting simply as an incentive to offer health benefits to employees. Ligon writes: “the employer mandate structure in the House-passed health care bill would create a strong disincentive for a business to expand compensation or even acquire new workers.” This is because, as a business nears a higher payroll bracket, it also risks spending a much higher percentage of its earnings to pay the penalty tax. For example, an employer with total payroll of $499,999 would have paying a $10,000 penalty if it increased its payroll just one dollar. Undoubtedly, this would cause any small business owner to reconsider before offering bonuses or wage increases to its workers.

    In the Senate bill, employers with 25 workers or fewer are exempt from paying a penalty for not offering health care to its employees. Not only does the House bill eliminate this exemption, but it also penalizes small business such that employers with 25 workers or less could end up paying the full 8% payroll tax. Ligon estimates that as many as 68,288 small businesses could fall in the highest marginal penalty range (8%).

    Businesses affected by this tax would clearly react to its ramifications, especially during a period of economic downturn. Those who could not afford to offer health benefits or pay the higher tax would look for other ways to outmaneuver the government. This would most effectively be done by containing or reducing wages, and failing to hire additional workers. With an unemployment rate stagnating at 10%, this is the opposite direction in which Congress should be sending small business.

    Posted in Obamacare [slideshow_deploy]

    9 Responses to The House Health Care Bill: Sticking it to Small Business

    1. Ozzy6900 says:

      These Liberals have set up a great domino scenario.

      * People HAVE to have health care insurance or they will be fined.

      * Businesses HAVE to provide health care insurance or they will be fined.

      * Businesses cannot pass on the cost of health care to the employee.

      * Businesses WILL be taxed per employee that they provide insurance for.

      So what happens next?

      * Those that presently have no health insurance will STILL not have any because there will be no jobs to provide them with insurance!

      * Those that presently have health insurance from their employer will get a reduction in wages to cover all the charges that the employer has to come up with.

      * Jobs will be lost because many small businesses cannot afford to run this gammit of idiocy.

      * Business will close because the Government mandates will just be too expensive to afford.

      * People with no jobs will not have food or shelter and they STILL will not have health insurance.

      * The entire economy will collapse worse than it is now.

      * Some Country will attack another Country for some stupid reason plunging the whole World into war.


    2. Fritz Pfister Spring says:

      The current adminstration doesn't care about unemployment as much as getting any form of health care passed. This will allow them to get to their desired goal of a government single payer system, entrenching their power when all will be dependent upon them for their families health care. The key will be employee education regarding this form of health care reform, the harm it will cause their employers, versus no dicernable benefit as health care becomes rationed, and inferior to what they have now. Then they will vote differently. It's probably too late. Progressives would sell their souls if they had one, to finally achieve this massive governemnt takeover.

    3. stirling, Pennsylvan says:

      This is just Government's way of controlling the private sector into financial oblivion thru regualation. The whole idea of penalizing rather then incentivizing small business is extreemely anti-american and anti-free market idealogy. This was not what the founders of our country invisioned when they wrote the consitution. Our country was founded on government hands-off of the people's business. The individual was #1 and government was #2. Government is still a #2 in my opinion. :P

    4. Linda, Maryland says:

      It's too bad that most of us have to rely on the bargaining power our employers have to negotiate affordable health care premiums. If we could buy the plans on our own, we wouldn't have to go through our employers. That would require plans to be offered at a more affordable price to the public. Hmmm…. if only we could do that.

    5. Dave Bartels. Grand says:

      I have been studying this issue for 7 years, since my sister got cancer. Have read well over 100 articles on it. There are some improvements that can be made in health care in the USA. Pelosi, Obama, Reid & friends would make you believe that health insurance companies and drug companies are evil & the root of the problem. They fail to tell the public there are 3 other huge problem areas: 1) obesity, 2) the government itself, and 3) lawsuits. The CDC reports that one fourth of all our our health care costs are the resuslt of adult onset diabetes & its complications: high blood pressure, stroke, heart problems, etc. That is one out of every four dollars. What does the current legislation do to help in that regard.? Government is a problem, because in 1985 they passed a law making hospitals take all comers at the emergency doors, regardless of ability to pay. Sounded like a good samaritan idea. But 9 million households have incomes over $75,000 a year…..and no insurance. They are taking advantage of this loophole……….thanks to the US Congress. Thirdly, lets look at lawsuits. My friend in the local ER says one doctor there admits 95% of the people he sees at ER……way above average……..because he is so afraid of lawsuits. That increases the costs. Tackling these issues would be the cost containment we so definitely need. But the bills in Congress are not about this. They are about power. Government power. Government control. The current bills should be voted down & they can start over.

    6. Bruce Washington Sta says:

      All MY representitives have spent their time this past year dancing around both the problum and the cure for health care in MY country. The problum is not with all the employers it is not how to force people to comply with yet another regulation to continue to be in business. The problum is insurance is priced TOO HIGH and the coverage is detirmend by profit margens and anual profit increses no matter what shape the economy is in. The care WE receive is completely based on MONEY and not on what care we need. As it is now insurance companys dictate who lives and who dies. My TAX dollars payed for and built all the public hospitals and we the people Grant money to them to expand and update these facilitys. Then Greed takes over and this is passed on to insurance companys who insist on yearly increeses in profit beyond reason. I personaly have never seen more than a cost of living increese in pay per year. The answer is in how to STOP price gouging by medical facilities and insurance Barrons- in the past we referred to them as Robber Barrons, raining in the owners and CEO's and board of directors of these companys for whom enough is NEVER going to be enough. Affordable means what people can afford to pay out with out leaving them completely broke. with coverage to get them what they need to keep them well and healthy. Please stop filling your pockets at every one elses expence and solve the real problum. READ what Jefferson wrote in 1802 and rejoin the United states of America. Thomas Jefferson said "I believe that banking institutions are dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that grow up around the banks will deprive the people of all property until their children wake-up homeless on the cintinent their fathers conquered.

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    8. Les Stettner, Florid says:

      If you were to read my book, "The War on Medical Terrorism" you could understand why the Public Option was so critical to the weak healthcare reform bill that was defeated, for the wrong reasons. We do need healthcare reform and very badly. I do believe the legislation was flawed in many respects, however, there is an opportunity here to make healthcare affordable for all American citizens. Unfortunately, being critical does not always lead to solutions. Healthcare is certainly the most important aspect of our lives. Have we lost our focus chasing the dollar and I am a capitalist, to do what is best for the growth of capitalism, in general? Why not remove the beast of burden that benefits present thru a payroll tax to corporate America? Yes, if we create competative jobs for the future, perhaps like green jobs that are talked about, but not being created, Americans could have jobs when the economy is back on track, where a payroll tax could be collected to fund the system. The idea is to keep Americans productive and rebuild for our children's future. American business needs to refocus on their respective business, not the benefits it over promises on and under delivers onto it's employees. American businesses would flourish if we employed an individual payroll tax in some aspects similar to Medicare for All, to pay for medical expenses. The healthcare reimbursement systemRBRVS) and it's perverse incentives needs to change and reflect modern approaches to prevention. The leading cause of death in American healthcare is coronary artery disease which can be prevented almost 100% of the time. Doesn't anyone have a conscious? The people I represent in my consulting world are Americans with health insurance who are getting ripped off by their State Insurance Department for lack of enforcement or just thru their villanous health insurance carrier, directly. Something needs to change and fast. In every difficulty lies a great opportunity.

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