President Obama’s healthcare reform has been the topic of heavy debate in recent weeks, especially among small businesses who have both a lot to gain and a lot to lose from such a reform. Of the 39 million Americans who do not have healthcare, an estimated one-third are employed by small businesses. The most recent Congressional proposal would mandate that any company with over $400,000 in payroll costs per year to offer employees healthcare or surrender a penalty totaling 8% of total annual payroll. Such a reform would exempt small businesses with payroll costs under $250,000, but would employ reduced penalties for those small businesses with payroll costs between $250,000 and $400,000.
The President’s Council of Economic Advisors reports that these health care reforms will benefit small businesses both by lowering their health care costs and by increasing coverage options for small business employees. A study by economist Jonathan Gruber of M.I.T. concluded that health care reform would benefit small businesses by streamlining the purchase of insurance and by lowering administrative expenses associated with insurance policies. Gruber’s statistical analysis concluded that health care reform would save small businesses between $546 and $855 billion over the next decade.
So, health care reform is a friend of small business, right? Unfortunately, the answer is a beautiful shade of gray. Analysts agree that in the short term, the proposed reform will actually cost small businesses $6.5 billion in profits this year alone. As a result of reform, small business profits in the US would not increase until 2013. Amidst an economic recession where many small businesses fail to make any profits, a final decision on a healthcare reform with a component aimed at small businesses will be difficult to make.
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