Health Reform Benefits New York's Small Businesses

November 4, 2009 (NEW YORK): Inaction on health care reform represents the worst scenario for New York State's small businesses, according to a report released today by the New York State Health Foundation (NYSHealth) and Small Business Majority. Compared to maintaining the status quo, a health care reform plan similar to that being considered by Congress, as well as other types of reform plans, would bring positive improvements for small business owners and their workers. The study, based on a model developed by prominent Massachusetts Institute of Technology economist Jonathan Gruber, examines four different health care reform scenarios, as well as projected outcomes of taking no action and allowing current trends to continue. The scenarios include:

• Two Shared Responsibility schemes under which access to coverage is guaranteed, public programs include everyone below the federal poverty line, coverage for children is mandated, and employees offered insurance through their employers are automatically enrolled. Under these plans, employers who offer insurance receive tax credits, while those who do not pay a fee. This arrangement resembles health care reform plans under active consideration by Congress.
• A Market Reform scenario modeled after the Manhattan Institute's Rx NY plan, which includes a package of tax credits, a pooling of New York's highest-risk individuals, and an easing of the State's health insurance regulation.
• A Single-Payer system in which the government provides health insurance to everyone employed or unemployed and employers and employees share in a 10% payroll tax.

In weighing the costs and benefits that these different proposals and the course of inaction would pose for small businesses over the next 10 years, the study considered five key benchmarks: health insurance costs, employee wages, jobs, profits, and job lock (the number of employees who stay in a job longer than they want for fear of losing their health care coverage).

"New York's small businesses cannot afford the status quo," said James R. Knickman, President and CEO of NYSHealth. These findings underscore the urgent need to reform our health care system and to do so quickly.

The report found that under the current health care system, New York's small businesses would spend $155.6 billion on health insurance costs and lose $2.4 billion in profits cumulatively over the next 10 years. Small business employees would also feel the pinch, losing some $54.2 billion in wages to cover health care costs and, in some cases, feeling locked into their jobs knowing they might be unable to access or afford coverage elsewhere. Finally, the report finds that if the status quo continues, small businesses would lose 10,000 jobs by 2018. (See Table 1 for breakdown of figures.)

Small businesses are being crushed by rising health insurance costs, and employees of small business are far more likely to be uninsured than are those of bigger businesses, said Benjamin Geyerhahn, New York State Director of Small Business Majority. The current system isn't working and small businesses want to be part of a comprehensive solution.

While the report does not support the implementation of one reform effort over another, it shows that they all have clear advantages in comparison to allowing current trends to continue. Some reform scenarios offer larger benefits than others.

Doing nothing is no longer an option. No matter what path to reform you prefer, small businesses stand to be among the winners from enacting health care reforms, said David Sandman, Senior Vice President of NYSHealth.

The Shared Responsibility reforms outperform the status quo in all of the areas measured. Both plans would reduce the cumulative costs borne by small business by $50.2 billion dollars, or 32%, over 10 years, and reduce the amount of profits lost by at least 60%, to $1 billion. These reforms would also reduce the amount of wages lost by 76% to $12.8 billion, and cut job loss by 80% (2,000 versus 10,000). The increased accessibility and affordability of health care under these reforms would also reduce job lock.

The Market Reform proposal also outperformed the status quo in all areas measured. Under this proposal, small businesses would spend $116.7 billion on cumulative health care costs, 25% less than under the current system, and reduce profits lost by 47% to $1.3 billion in 2018. Cumulative wages lost would fall by 50% to $27.1 billion, and jobs lost would fall by 30% to 7,000. Job lock would also be reduced.

The final scenario examined, the Single-Payer system, would have a more mixed impact. This proposal would increase overall costs to small businesses by 8.5%, up to $13.3 billion, by 2018. It would also result in a 116% increase in profits lost, up to $5.2 billion, over current trends. However, the single-payer plan would have the greatest impact on employee wages, reducing wages lost to health care costs to $4.2 billion or by 92%. The single-payer system would also reduce job loss by 50% (5,000 versus 10,000) and completely eliminate job lock.

Complete copies of the study are available at www.nyshealthfoundation.org or www.smallbusinessmajority.org.

Table 1: Estimated Impact of Four Health Care Reform Options on Small Businesses in New York State

*Cumulative numbers reflect a 10-year period, 2009-2018.