7-25-09, 9:45 am

The overwhelming majority of small business owners will see important new benefits as a result of health reform working through Congress right now, said Council of Economic Advisors (CEA) Chair Christina Romer and Small Business Administration (SBA) head Karen Mills in a joint teleconference with reporters, July 24. The two Obama administration officials announced the release of an administration report detailing the impact of health reform on small business owners.

President Obama made the contents of that report the subject of his weekly address to the nation, July 25.

According to the CEA report, less than one-half of small businesses with fewer than 10 employees can provide health care benefits. When they can provide such benefits, small business owners pay up to 18 percent more for health insurance than medium-sized and large companies. In addition, because of the current broken health system, small businesses struggle with retaining employees due to the expense of health benefits. High employee turnover harms productivity and adds to business costs.

Approximately one-third of the uninsured, or 13 million people, are employed in businesses with less than 100 people, the report showed.

'Small businesses want to provide (health benefits),' said Administrator Mills. 'They're like a family, but sometimes they can't afford it. And when someone gets sick, there's a commercial cost and a personal cost.'

'You really can't solve the problem of the uninsured unless you address this issue of access to affordable care with small businesses,' Mills added. Because small businesses play such a big role in the economy, health reform will have an important impact on making sure they stay afloat and helping to stimulate economic recovery.

Health reform is one component of the administration's plan for creating an environment where small businesses can prosper and create jobs, Mills said.

Obama's top economic advisor, Christina Romer, agreed and explained specific ways small businesses will benefit from the health reform plans being worked out in Congress.

Because the reform plans include an insurance exchange that will create real competition and increase the size of insurance pools, employers who pay for health benefits will see reduced costs, Romer said. 'That's something that's obviously going to be good for the small business and good for their workers.'

Small businesses that pay for health benefits will be eligible for a new tax credit, Romer indicated. A planned employer mandate, which would require business owners to either pay for benefits or pay into a public fund to finance health reform, will exclude most small business owners.

A more difficult to calculate but no less meaningful benefit to small businesses would come with stability and increased productivity when workers are less concerned about the status of their health benefits, Romer said. 'One of the things reform is going to do is open up a new pool of workers who are no longer worried about whether or not they will have insurance if they change jobs or whether some preexisting condition is going to deny them coverage.'

Tax question

Romer also deflected criticisms coming from Republican officials and strategists that funding mechanisms for the health reform plan supported by the President or included in the House bill would impose higher taxes on small business owners.

Administration officials say the President favors limiting deductions on the highest income tax brackets, returning the tax code to the 1986 level signed into law by President Reagan. Another congressional proposal offered in the House bill would add a surcharge on very high incomes.

While the CEA report did not examine the specific impact of these two funding mechanisms in the health reform plans on small business owners, Romer explained that 'the vast, vast majority of small business owners are below those levels where the new revenue streams will kick in.'

If the surcharge included in the House bill passed, Romer noted, based on federal income tax data, 96 percent of people who earn income from business sources fall below the income levels proposed in the plan and would avoid the surcharge. She added that of the remaining four percent with incomes high enough to fall into the surcharge category, only a fraction earn enough from business sources to be included in that proposed tax code change.

Testimonial

Many small business owners have endorsed health reform. For example, Kelly Conklin, co-owner of Foley-Waite Associates in Bloomfield, NJ, described the current health system as 'an administrative nightmare' and saw a huge financial benefit for his business if reform passes.

Conklin, who has owned his business for 31 years and works with the Main Street Alliance, a national organization of small business owners who back health reform along the lines proposed by President Obama, said, 'When we access health insurance, the system is so fractured and inefficient, that very often it causes as much harm as it addresses.'

Urging swift action on passage of the reform package, Conklin expressed strong support of the House bill's inclusion of a surcharge on the wealthiest one percent of Americans as a funding mechanism and strongly endorsed the inclusion of a public option in both the Senate and House bills.

Public option essential to reform

In explaining how the insurance exchange would work based on the existing proposals in Congress, Romer suggested that the public option serves as a necessary component. For the exchange to be viable, on the one hand, she said, it needs plenty of people and small businesses to be pooled together.

On the other, there need to be enough insurance providers participating as well, and that would be the main role of the public insurance program, she stated. 'One of the things that the President has talked about when he talked about why a public plan is important was to make sure that there is always an option, that there is plenty of competition between providers,' Romer said.

See the President's July 25th remarks on this subject here: