Your Turn NH: Obamacare is a real problem for small businesses like mine
To most of us, the new health care law seems too complex and too abstract to digest, and its implementation seems far off and politically uncertain. Therefore we haven't taken the time to learn what it really says, and we base our perceptions on short news stories about new benefits, controversies and select provisions of the law that interest us personally. This very important legislation is affecting many of us already, and it will affect every one of us soon. I am concerned about the consequences of what this law does and does not do for our employees, our business and our nation.
First, there is no question that our current health care system is unsustainable and that all recipients of care need to pay their fair share. I do not think that the new law is entirely bad, nor that we should return to the 2009 status quo. In fact, I am less concerned about the law going too far than I am about it not going far enough.
It does nothing to fix the current model that drives health care inflation by separating consumers from information about the costs of what they are buying. It does nothing to address legal (tort) reform, which is badly needed to reduce liability insurance costs and 'defensive medicine' - unnecessary tests and procedures that are ordered by doctors to protect themselves from litigation. It does little about the looming demographic Medicare time bomb (retiring baby boomers will overwhelm the system), and it leaves in place the vast network of private insurers and brokers who add costs to the system while rationing care.
It places additional burdens on American businesses that are already struggling to be competitive, while it creates strong incentives for them to reduce or limit their numbers of full time employees.
Perhaps most importantly, I question the future effectiveness of this law to make health care more affordable or accessible to most Americans. Let me explain by describing the actual circumstances facing our business, which meets nearly every federal definition of 'small,' but is considered 'large' under the new health care law because we have more than 50 full-time employees.
For decades our business has offered its employees health insurance. We believe that this is an important benefit that recognizes the value of our people, who are the lifeblood of the organization. Single employees had free coverage until nine years ago, while couples and families paid part of the premiums due to the higher costs of their coverage.
During the last nine years, rapidly rising costs have forced us to require all employees to pay more and more for their coverage. In the last four years alone, the total cost of single coverage has increased 65 percent, while the premiums for family coverage jumped 58 percent. During this period we have been unable to increase prices to our customers due to the recession and global competition. It is becoming increasingly difficult for both employees and the company to shoulder this burden.
Part of the recent dramatic increase in premiums is directly attributable to the new health care law. I personally agree with some of the expanded coverage that the law is requiring insurers to provide, such as coverage for pre-existing conditions and contraceptives. These new benefits are not free, however, and neither the insurance companies nor the government is paying for them. Rates have increased correspondingly for everyone who buys health insurance.
Many people are aware that beginning in 2014, businesses of our size that don't offer health insurance will be fined $2,000 per full-time-employee. What most people don't know is that even if we do offer insurance, we can still be fined $3,000 for each employee who chooses not to purchase our coverage if that coverage is deemed 'inadequate' or 'unaffordable' by government standards.
This means that our choice will be to either pay the $2,000 per employee penalty and leave our employees without insurance, or pay premiums in excess of $6,000 per employee and still be at risk for the $3,000 per employee penalty.
We strongly prefer to continue our health insurance benefit, but it is easy to see that many other employers may not, and if costs continue to escalate, it may become impossible. Meanwhile, we are reluctantly moving toward doing more work with temporary and part-time employees, a practice that we have historically avoided.
What happens to people without coverage? They will have to either purchase a policy from a state 'insurance exchange' or pay penalties themselves. Thus far New Hampshire has refused to establish an insurance exchange, leaving it to the Federal government to do so. No one knows what the costs of 'exchange coverage' will be, but it will be provided by for-profit insurance companies, so there is little reason to expect the rates to go down. For our group, the current cost is more than $6,000 per year for singles.
The penalties for being uninsured, while not insignificant, are small relative to the current costs of coverage: $95 per person in 2014, increasing to $695 per person in 2016, and more after that. I am concerned that millions of individuals will pay the penalties rather than pay for coverage, leaving us with just as many people uninsured as before. If large numbers of employers discontinue their health insurance benefits because of the cost dynamics explained above, there could be more uninsured Americans than ever.
Many summaries of the new health care law are available on the Internet. In 30 minutes you can learn more than what you've read here. This law is going to affect all of us, perhaps dramatically. I encourage you to learn more about it.
David Hill is president of P.J. Noyes Co. in Lancaster.