Analysis projects $855 billion in savings for small business over 10 years under reformed health system

Washington, DC Comprehensive health reform that includes employers paying a share of healthcare costs would provide a much-needed shot in the arm to America's small businesses, according to a new study released today by the nonpartisan Small Business Majority.

The analysis, conducted by Massachusetts Institute of Technology economist Jonathan Gruber, Ph.D., uses an economic simulation model to gauge the impact of health reform on businesses with 100 or fewer employees. The results show that proposals currently gaining traction among lawmaker those that include a financing system of shared responsibility would protect wages and curb job loss for people who work in small businesses, while saving hundreds of billions of dollars in healthcare costs for small business owners.

This analysis confirms that health reform will dramatically cut costs for small businesses and allow them to stay in business, said John Arensmeyer, chief executive officer of Small Business Majority. They may be required to offer insurance or pay into the system, but if that can be done in a way that ultimately improves their bottom line and provides health coverage to their employees, they're willing and prepared to be part of the solution.

The study compares the effects of three reform scenarios on small business and contrasts them with the impact of maintaining the current system, absent any reform. Each scenario assumes a basic reform package that would control costs and enable all Americans to obtain coverage, but all three use a varying amount of tax credits for small employers who offer insurance, and differing payment levels from small employers who don't all based on size of the business. The analysis shows that even under a scenario with limited support to small business owners, reform would still bring significant benefits. The results show:

Shared responsibility will reduce the cost to small businesses of providing health insurance.
The analysis shows that without reform, small businesses will pay nearly $2.4 trillion dollars over the next 10 years in healthcare costs for their workers (from $156 billion in 2009, to $339 billion in 2018). With reform, the study shows that small businesses could save as much as $855 billion over 10 years, a reduction of 36 percent, money that can be reinvested to grow the economy.

Healthcare reform will save jobs.
While the study acknowledges that healthcare costs are rising so quickly that there is no way to prevent some future job loss due to those costs, reforms can significantly curb those losses. Without reform, the study shows that 178,000 small business jobs will be lost in 2018 as a result of healthcare costs. Depending on the level of support provided to small businesses to help meet their healthcare obligations, however, the report shows that 128,000 of these jobs can be preserved, reducing potential unemployment by as much as 72 percent.

Healthcare reform will preserve wages for employees of small businesses.
Numerous studies show that rising healthcare costs are reducing the take-home pay for everyone, especially employees of small businesses. The analysis shows that if the current healthcare system is not reformed, small business workers will see $12 billion in total wages lost in 2009, growing to $172 billion in lost wages by 2018. Reform would preserve 63 percent of these otherwise lost wages for employees.

Healthcare reform will bolster small business profits and competitiveness.
The study shows that over the next 10 years, small businesses will lose $52.1 billion in profits to high healthcare costs. Healthcare reform can reduce these losses by more than 56 percent, saving $29.2 billion in small business profits, and allowing small business owners to reinvest those dollars in the economy.

The analysis uses the well-known Gruber Microsimulation Model (GMSIM) to analyze the impact of numerous healthcare reform plans. It is similar to the model used by the Congressional Budget Office, the Joint Tax Commission and other government scoring organizations.

Small Business Majority was founded four years ago to bring the voice of America's 27 million small businesses to the public policy table. The nonprofit, nonpartisan organization is run by small business owners focused on solving the biggest problem facing small businesses today: the skyrocketing cost of healthcare. It uses scientific research to understand and represent the interests of all small businesses.

For too long there's been this feeling that if you're pro business, you're against health reform, said Arensmeyer. Those old, entrenched views are not held by small business owners I talk with every day. Regardless of their political views, all small business owners want lower healthcare costs, so they can grow their business and offer insurance that enables them to attract and retain good employees. They want more choice and plans that are easy to understand and cover high-quality care. They want coverage options for everybody, and a fair system that helps them do their part.

According to Small Business Administration estimates, there were approximately 26.9 million businesses of 100 or fewer employees in America in 2007 including 21 million self-employed. These small businesses employ 63.7 million people, or 42 percent of the U.S. workforce.