By Vinnie Aggarwal

As the U.S. moves closer to passing a healthcare reform bill, it is important to ascertain the broader implications of such a dramatic change—especially for small business. A National Small Business Association survey found that only 38 percent of small businesses with less than 200 employees were able to offer coverage for their employees in 2008, down from 67 percent in 1995, whereas companies with more than 200 employees covered their employees 99 percent of the time.

The proposed reforms would address many of the problems that small businesses face with respect to healthcare. Creating insurance exchanges would force insurance plans to compete for business and allow small businesses to pool risk, streamline administrative cost, eliminate the need for brokers, and access a public option plan. The exchange would be operational in 2013 for individuals and businesses with less than five workers, expanding to businesses up to 100 employees by 2015. Many small businesses with low-wage workers would also be eligible for significant tax credits that would subsidize their coverage as well. Finally, the pay or play mandate would force some firms to begin coverage but would exempt businesses with 25 or fewer employees.

There are potentially many benefits from this plan. According to the National Small Business Association, since 1989, small businesses have created 93.5 percent of all net new jobs and said reducing the costs of starting a business would increase entrepreneurship and innovation. Existing businesses would be able to devote more of their money back into their businesses and generate more profits. Small businesses will be able to divert more of their profits to innovation and profits. It would also reduce the phenomenon of job lock-in, whereby workers stay at their jobs because they fear being able to find affordable coverage. Moreover, healthier employees make more productive employees, and reduction in absenteeism and increased worker productivity are expected to follow.

Workers would benefit as well. In all, 70 percent of uninsured Americans come from families with one or two full-time workers, most of whom are employed by small businesses that offer either unaffordable benefits or no coverage at all. Addressing the issue of lack of health coverage for small businesses could go a long way toward achieving healthcare for many more people. Moreover, health insurers would not be allowed to pre-screen employees for pre-existing conditions, considerably helping those who really need healthcare coverage.

However, some businesses will be adversely affected by the plan. One estimate suggests that 39,000 firms would have to start providing benefits or pay a penalty, and another 240,000 that already provide healthcare would have to increase their subsidy levels. But since there are a total of 6 million small and large businesses in the United States, many more would benefit from reform than would lose out from the status quo. A study commissioned by the Small Business Majority estimates that without reform, small businesses would pay almost $2.4 trillion by 2019. With reform, they can save as much as $855 billion.

There seems to be mixed support from small businesses. In particular, the National Federation of Independent Businesses (NFIB), the nation's most influential small business group, is pushing back against the current reform plans, especially the public option. Part of the reason for the disconnect may lie in the fact that NFIB also represents large employers who may be adversely affected by cost-shifting and new rules for minimum standards of coverage. The Main Street Alliance, a new small business lobbying group centered on health reform, notes that in its survey of 1,200 small businesses in 12 states, 59 percent prefer a public option and only 6 percent want more private plan choices alone. In any case, although it may be easy to become polarized on the issue, it is important to remember that no plan is completely perfect or completely disastrous. However, in terms of creating the benefits for most people at manageable costs, small businesses will, on the whole, win under healthcare reform.

¹http://www.time.com/time/nation/article/0,8599,1938885,00.html
²http://www.whitehouse.gov/administration/eop/cea/Health-Care-Reform-and-Small-Businesses/
³http://money.cnn.com/2009/07/06/news/economy/health_reform/
⁴http://www.cbsnews.com/stories/2009/06/16/politics/main5092451.shtml
⁵http://www.nytimes.com/2009/08/13/opinion/13thu1.html
⁶http://www.smallbusinessmajority.org/econ_research.php
7http://money.cnn.com/2009/07/02/smallbusiness/small_business_health_care_plans.smb/index.htm