HR Roundtable panel member Bill Pinto gives his take on the health care reform bills currently being debated in Congress, and their impact on small businesses and their employees:
The Senate Health, Education, Labor and Pensions Committee approved a bill yesterday that requires certain businesses to offer health insurance to their employees or pay a penalty to the federal government. Few would argue that it’s a bad idea to encourage the expansion of health care coverage for employees. But will this bill have the intended effect?
Under the Senate proposal, businesses that do not provide health insurance would be required to pay $750 per year for every full-time employee who is not provided coverage, and $350 per year for every part-time employee not covered.
In the House, Democrats unveiled their own reform bill that calls for penalties on businesses for failing to provide health insurance and surcharges (read “taxes”) on individuals that have certain adjusted gross incomes to help pay for the Democrats’ proposed health care reform bill. Under the House Democrats’ plan, it is likely that a small business owner could be hit twice: once with the penalty and again by the surcharge because many small business owners pass their business income through their individual returns.
All this reform begs the question whether these reforms are good from a job creation standpoint. Many HR managers can tell the stories of businesses that have cut back on staff in an attempt to survive these economic times. Those businesses have also cut back on a number of costs associated with their employees, including dropping 401(k) matches and raising employee contributions on health insurance. As those businesses make plans for the rest of 2009 and 2010, how can these Senate and House proposals not weigh on the minds of the owners contemplating hiring additional employees? In these times, businesses are running on very thin margins. When owners hire employees, they do not simply factor in salary numbers. There are other costs associated with every employee, including employment taxes, unemployment insurance, and worker’s compensation coverage, among other things. Adding to the equation the cost of health insurance or a penalty for not providing coverage could be the tipping point that pushes owners to sit on the sidelines and not hire any additional employees. If business does pick up later this year or next and owners have not hired additional employees, that only forces current employees to work that much harder.
Some may say that securing health coverage for current employees is worth the price of not hiring additional people. That begs the question whether this bill is addressing a real issue of uninsured employees. The Senate proposal, for example, exempts small businesses with fewer than 25 employees, but 90% of the businesses that would not be exempted already provide health insurance for their employees. What is the cost on job creation of trying to move towards 100% coverage? And is that cost worth it?
And what impact will this have on HR managers who often are the individuals helping employees navigate through the health insurance waters? If businesses decide not to provide coverage and determine that it is cheaper to pay the penalty, that could affect morale negatively in two ways: First, employees will feel unappreciated because the owners are not providing insurance and second, employees will have to rely on a government-controlled plan which has left many people dissatisfied in Massachusetts where the state attempted such a plan.
What is your reaction to the proposed plans? How do you think your workplace will be affected if these or other reforms are passed? Do you have a better solution? Does your employer already offer health insurance? If so, do you take advantage of it or do you have individual insurance?