With John Boehner touting “Repeal and Replace” of health-care legislation to be a top priority of the next Congress and President Obama holding a veto, it may be useful to think about how great the surgery needs to be. I’ve asked frequent commenter Bill McCormick for his thoughts from a small business perspective.
First, what does McCormick know about small business? He has some academic credentials – a Harvard Business School graduate program for small business owners – but, more importantly he has a 40 year history of starting successful small businesses from management recruiting and business travel agencies to innovative Hallmark shops, to off site electronic data storage. His “top 25” management recruiting firm in particular gives him insight into the thinking of a broad range of businesses large and small.
Some of his thoughts:
1. The political system caters to the large corporations. That is where money for political campaigns is more easily raised, lobbyists are employed, and large blocks of voters can be found. And the companies like General Electric, Bank of America, and Boeing are politically agnostic – whoever will address their needs. Small business owners on the other hand have not been of much interest to the Democrats.
2. With large scale, low skill manufacturing migrating overseas, we are left with an economy in which 75% of our 107 million workforce is employed in businesses averaging 10 or so employees – flower shops, builders, computer services, landscaping, and professional practices. Some do make stuff. This is a turbulent environment where most businesses last just a few years with many of the successful ones being acquired by larger firms. In the section of the economy served by small businesses Return on Investment is often too low, complexity is too great, customer interaction is too demanding, and change is too rapid for large corporations. But this is where job creation must happen.
3. The 2010 health-care reform did not change the basic premise of employers bearing the cost of insuring most of the populace and did not do much of anything to reduce the costs in the system. Government funding pays for some of the expanded coverage, but popular mandates like “preexisting conditions” and covering children to age 26 fall back on to the insurance companies and to the people paying their bill. McCormick’s company rates had an average annual increase of 9% for Bush’s last three years and 25% for Obama’s first three. It is a sample of one, but representative.
4. Many of the features of the current system and Obamacare are particularly burdensome to small businesses: small insured pools which cause single large claims to cause rate spikes (A. allow large pools across state lines); disproportionate effects of a catastrophic illness or disability (A. let the government handle truly catastrophic illnesses); provisions which prevent older workers from relying primarily on Medicare (A. allow workers over 65 to use Medicare with a company-paid supplement); higher risk that the small business insurer will go out of business, leaving the insurer on the hook (A. see larger pools above); and burdensome federal reporting (A. as a start, get rid of the Obamacare requirement for reporting all company payments over $600.) More broadly, get beyond insurance and go after the real cost reductions – tort reform; competitive pricing for pharmaceuticals and equipment; nurse practitioners; neighborhood clinics.
5. Many of the answers are simple if the administration were to listen to small business owners. Instead, if one were cynical, one might think that the intent was to drive small business owners to eliminate their coverage (incurring a modest fine) with the result that the majority of American workers would obtain expensive individual policies and create a demand for the government to take over the health insurance industry.
There are other things that would greatly invigorate small businesses – expand Small Business Administration-type loans for proven small businesses and promising start-ups; prevent higher interest rates or lower lines of credit for business borrowers who are current on payments; provide certainty on taxes; avoid union bias in government contracting – but eliminating the disincentive to hiring caused by the health-care legislation would go a long way toward getting the economy going. Correcting Obamacare is a legitimate top priority.
For the full posting, see www.RightinSanFrancisco.com