JOHN KERRY'S PLAN TO ADDRESS RISING HEALTH CARE COSTS TO HELP SMALL BUSINESSES THRIVE
http://www.johnkerry.com/pressroom/releases/pr_2004_0511.htmlSkyrocketing health care costs not only make it difficult for families to afford quality, reliable coverage, but it makes it hard for America's small businesses to expand. Unfortunately, under George Bush, rising health care costs have squeezed small businesses and eliminated jobs. Health care costs have risen four times faster than wages in the last year. Not only has Bush done nothing to alleviate the financial stress that small businesses are facing with increasing premiums, but the few proposals Bush has offered would make matters worse.
John Kerry has a real plan to alleviate health care costs for small businesses, create jobs, and make them more competitive. Kerry's plan addresses the underlying challenges that small businesses face in offering health insurance by creating an option to buy into the same health plan as members of Congress, providing tax credits to make this coverage more affordable, and relieving firms of the costs of catastrophic health cases.
John Kerry's premium rebate plan will reduce healthcare premiums by up to $1,000. In addition, Kerry's small business tax credit would provide up to a 50 percent tax credit – providing up to about $3,000 per qualifying small business employee.
Small Businesses Are Critical to the Economy 99.7 percent of all employers are small businesses.
In 2002, there were 23 million small businesses. These small businesses employed approximately half of all Americans and were responsible for half of U.S. GDP.
Small businesses created about three-quarters of the net new jobs between 1999-2000 – 2.5 million of the 3.4 million total new jobs created.
Small businesses produce 13 to 14 times more patents per employee than large patenting firms.
Challenges for Small Businesses Providing Health Insurance
Small businesses are straining to pay their employees' health insurance. They cannot spread the risks of catastrophic cases over a large number of employees, so if even one employee incurs substantial health costs, the premiums for everyone can go up dramatically. Small businesses don't have the purchasing power that large companies use to negotiate more favorable rates, and they have a more difficult time covering administrative and other overhead costs required to offer employees a health insurance plan. As a result, small businesses are forced to pay more for inferior coverage, reducing affordability, increasing the number of uninsured Americans, and hurting job creation.
Health insurance premiums are increasing even more rapidly for small businesses than for larger businesses. From 2000 to 2003, health insurance premiums for small firms (3-199 employees) rose 47 percent – compared to a 40 percent increase for large firms (200+ employees).
Fewer small businesses offer health insurance. About 65 percent of small businesses offered a health plan in 2003, down from 68 percent in 2000. In comparison, about 98 percent of large firms offer health insurance to their workers.
Providing health insurance helps small businesses economically. In an economic survey of small businesses, many reported that offering health insurance helps them recruit and retain employees and increases overall productivity.
Small businesses increasingly cite the affordability of healthcare as the major reason that they do not offer employees coverage. In 2002, 63 percent of small businesses that did not offer health insurance cited the high cost as the major reason – up from 53 percent in 2000.
Small businesses are forced to offer less generous health insurance. The average deductible for small businesses is nearly twice as high as it is for large businesses – $419 vs. $209. This means that employees at small businesses have to pay more money out of their own pocket before insurance starts to cover their costs. 57 percent of small businesses cover dental benefits, compared to 87 percent of large firms. Only 25 percent of small businesses offer health plan choices to their employees.
Small businesses employees pay more of the cost of their insurance. Among small firms, 38 percent of employees pay 41 percent or more of their health insurance. At large firms, only 11 percent of employees pay 41 percent or more of their health insurance.
Small businesses may shift even more of the increasing costs of coverage to their employees. In a recent survey, 35 percent of small businesses that now offer insurance say they are likely to increase the share of costs borne by employees in the next year.
Nearly half of the uninsured work for small businesses. Nearly 50 percent of the 44 million uninsured Americans are self employed or work in businesses with 25 or fewer employees.
Employers have responded to rising health costs by slowing hiring and shifting to more part-time and temporary workers, who often do not get health insurance. Some evidence of this trend:
2.2 million private-sector jobs lost since January 2001
1.2 million more people working “part-time for economic reasons” since January 2001
61,000 temporary jobs have been added in the last year
Rising Health Costs Have Impacted Employment the Most In Industries That Have High Health Benefit Costs.
Rising health costs have had the largest impact on employment in industries that have the best health benefits. For example, between 2000 and 2002, employment went down 13 percent for automobile manufacturing but went up 1 percent for car dealers. Part of the reason for this dramatic difference is health benefits. Motor vehicle manufacturers get much more generous health benefits (total benefits are 25 percent of compensation) compared to auto dealers who get much less generous benefits (only 13 percent of compensation).
Lower Health Care Costs Helped Canada Create New Jobs While America Lost Them. During the same period in which the United States has lost 2.2 million private sector jobs, Canada has created nearly 1 million. Lower health care costs are a factor in the creation of new jobs.
George Bush's Association Health Plans (AHPs) Would Only Make the Problem Worse
AHPs will “cherry pick” the healthy, fragmenting the insurance risk pool. AHPs will offer minimal benefit plans targeted at healthy workers, leaving behind groups with greater health care needs that are more expensive to insure. The Congressional Budget Office predicted that nearly two-thirds of the promised savings from AHPs will come from insurance companies cherry picking small businesses with the healthiest employees and refusing to cover others.
AHPs would harm more small-business workers than they will help. Studies show that AHPs will increase the cost of insurance for many small businesses and will increase the number of uninsured. The CBO estimated that AHPs could raise premiums for 4 out of 5 small businesses that keep traditional insurance.
Health premiums and the number of uninsured would rise. An independent study released in June 2003 found that insurance costs would increase by an average of 6 percent in the small-business market and that the number of uninsured would increase by over 1 million. William Lindsay, Chair of National Small Business Association, said, “We have no doubt that AHP proponents sincerely want to help small firms, but the unintended consequences would be catastrophic.” This study was commissioned by the National Small Business Association.
AHPs would remove important consumer protections. Today, states regulate the small group insurance market to ensure that insurers provide adequate benefits, stable premiums, and protection against insolvency. AHPs will be largely exempt from these state regulations, ending the safeguards that protect businesses and families.
Governors oppose AHPs. The NGA has said, “The legislation would raise already skyrocketing health care premiums for our most vulnerable populations while watering down states' existing financial oversight and consumer protection measures.”
Insurance Commissioners oppose AHPs . The Commissioners said, “AHPs can be fine for small businesses, as long as no one ever gets sick.”
Consumers oppose AHPs. The Consumers Union said, “AHPs would harm the health care system by creating skimpy coverage for some, driving up premiums for the sick, and undermining state efforts to spread health care costs fairly across the population.”
John Kerry's Plan for Small Businesses
John Kerry's Plan for Small Businesses
Small businesses will have a new option to buy the same health plan available to members of Congress. John Kerry will allow small businesses to buy into the same health plan as Members of Congress. This will allow small businesses to diversify their risks, get better prices, and reduce their administrative costs.
Tax credits will cut the cost of health insurance by up to 50 percent. Small businesses will get tax credits to help them provide health insurance for their low- and moderate-income employees. The tax credit will cover up to 50 percent of the cost of employees' premiums. The credit phases out for employees making over 300 percent of poverty. To be eligible, an employer offering the Congressional Health Plan will have to pay at least 50 percent of the health insurance premium and must take the new and more generous credit in lieu of the existing deduction.
“Premium rebate” will be even more beneficial for small employers. Because catastrophic costs are both high and unpredictable, they raise the cost of health insurance for all people. John Kerry proposes to create a “premium rebate” pool that will make health care more affordable for employers and employees by having the federal government help out with certain high cost health cases. These savings would be up to $1,000 annually for a family policy. The benefits of the premium rebates will be especially large for small businesses which have the hardest time diversifying the costs of catastrophic medical cases .
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