For years, the No. 1 policy issue for small businesses has been how to afford healthcare for their employees.
In today’s economy, if you want high-quality workers, as a business owner you must offer health insurance benefits. But years of skyrocketing premiums have made this option difficult, particularly for small businesses.
Unfortunately, some small business owners are falling for the latest healthcare reform bait-and-switch — the “public option” plan.
There is no doubt that the status quo is not good enough for employers, employees or the health care industry in general.
Healthcare costs continue to jump year after year towards an unsustainable future.
Not only are employers, especially in Washington state, handcuffed because they are limited in the choice of health benefits they can offer their employees, but employees suffer from the same lack of choice and control over their own health care.
The public option floating through Congress may appear to help small business’ bottom line at first, but this is deceiving.
Any employer will tell you that when hiring a new employee, the first thing he considers is the total cost to employ an individual, and that takes into account all non-cash and cash benefits — including health insurance.
So the notion that businesses will be better off by offloading health care costs onto taxpayers is disingenuous because the cost of employing their workers won’t actually decrease.
No one knows how much this public option will cost. Some estimates peg the ten-year cost at $1.7 trillion. And that’s being optimistic.
When the government introduced Medicare in 1965, the estimated cost to the taxpayer by 1990 was supposed to be $9 billion.
In reality, the cost was $67 billion — a seven-fold miscalculation.
So what happens if this public option ends up costing just three times as much as estimated?
That’s a 10-year cost of $5.1 trillion to taxpayers.
How will we pay for it? Through tax increases.
Several policymakers are already proposing new taxes on energy, new sin taxes, increasing the national debt, or ditching some tax exemptions (including charitable donations) or taxing health care benefits in order to pay for the new option.
If the proposed system is big enough and expensive enough, there is no chance the middle class and small business owners can escape paying these higher taxes to support this new entitlement.
It is interesting that one of the first arguments supporters of the public option put forward is that it won’t result in a government-run system like single-payer health care.
That may be so at first, but it certainly puts the nation on the road toward single-payer.
When public option proponents say the new system will simply “compete” in the marketplace they are ignoring some basic economic facts.
First, the government plan is wholly unlike its marketplace competitors in that the government can artificially keep health care premiums down.
How? By incurring more debt, printing more money, negotiating lower reimbursement rates, implementing price controls, or simply passing the cost off to the taxpayer.
No private health insurer can do this (and with good reason).
As a result of artificially low premiums, people will move to the public option or be forced onto it by their employers. Lewin Associates, an actuarial firm, estimates the number of people moving from private insurance to the government plan at about 118 million.
That’s a 60 percent reduction in the number of Americans with private insurance.
When that happens private insurers won’t be able to stay in business after hemorrhaging customers to the public plan, which will facilitate even more people to shift to the public option.
You probably see where this is going. Soon, the public “option” would be the only plan left.
The bottom line for small business is the public option will end up costing more because higher taxes to pay for a “free” health care system will be more difficult to absorb than rolling the cost of health care into an employee’s benefit package.
It is an accident of history, dating from World War II-era wage and price controls, that employer-provided health care benefits are so ingrained in our national psyche.
The public option will shift the health care burden from the business community to the government instead of allowing individuals to retain control over their own benefits — resulting in small businesses and individuals accepting a system that in reality will reduce options in the future.
Carl Gipson is director for small business and technology at Washington Policy Center,
