Democrats Push for Health Insurance Reform to Help Small Businesses

Strategic Insights -

Health insurance reform is a critical issue that affects not only small businesses but also their employees and the overall economy. As Senator Tom Harkin (D-IA) stressed during a press conference, the current system is unsustainable for millions of small businesses, with premiums increasing more than 74 percent in the last eight years. This has led to reduced hiring and benefits, forcing small businesses to make difficult choices between maintaining payroll and providing healthcare.

Small business owners like Gwendolyn Barnes and Mark Lane, who testified before Senator Mary Landrieu's committee, face significant challenges in providing healthcare to their employees. The lack of competition within the insurance market, where the top two insurers often maintain 74 percent of the market share, has led to higher premiums for small businesses. This is why the Democrats' plan aims to create an exchange system, similar to the one in the Senate Finance Bill, which would target individual and small group markets.

Key Takeaways:

  • Small businesses face significant challenges in providing healthcare to their employees, with premiums increasing more than 74 percent in the last eight years.
  • The lack of competition within the insurance market contributes to higher premiums for small businesses.
  • The Democrats' plan aims to create an exchange system, modeled after the Small Business Health Options Program (SHOP) Act, to provide small businesses with greater negotiating power and lower premiums.
  • The plan would include a tax credit to encourage small businesses to join the exchanges, as well as an individual responsibility to obtain health insurance, rather than an employer-mandate to provide coverage.
  • The Democrats' proposal is expected to save about 80,000 jobs in small businesses, according to estimates by Professor Jonathan Gruber.

Statistics:

  • Small businesses' spending on premiums will be reduced by about 25 percent over the next decade, according to Professor Gruber's studies.
  • The increase in workers' take-home pay nationwide will be almost $30 billion per year, according to Professor Gruber's estimates.
  • Small businesses face a 74 percent increase in premiums over the last eight years.
  • The top two insurers maintain 74 percent of the market share in some states, while in others, they maintain 94 percent (e.g., Alabama).
  • Small businesses pay about 18 percent more for the same coverage due to lack of leverage in the private market.

Sources:

  • Press conference with Democratic Senators, Congressman, and small business owners, S-207 Capitol Building, Washington, D.C., Tuesday, November 3, 2009.
  • Federal News Service, Inc. (2009). Transcript of press conference. Washington, D.C.: Federal News Service.