Small firms seek broad access to health exchanges

Small business groups are lobbying Congress to allow firms with as many as 100 employees to purchase health insurance through new exchanges that would be created through health care reform legislation.
These Web-based exchanges would offer individuals and small businesses standardized, easy-to-compare information about insurance plans available in their area. Under the Senate Finance Committee's bill, insurers could offer the same plan anywhere in the country through state-based exchanges.
These reforms would help bring down the cost of health insurance by bringing more competition to the insurance market, expanding the risk pool, pooling small businesses' purchasing power and reducing administrative costs, business groups contend.
Having a national plan as option in the exchange is "really important," said Sen. Olympia Snowe, R-Maine, because it would provide efficiencies of scale and more choices to small businesses in states where the small group market is dominated by one or two insurers.
The National Federation of Independent Business and the U.S. Chamber of Commerce agree. They contend giving small businesses the ability to shop for insurance across state lines is vital to increasing competition in the health insurance marketplace.
Both groups view the Senate Finance Committee's bill as the best approach to health care reform so far, even though they have serious concerns about some of its provisions. The Senate Finance Committee bill makes more small businesses eligible to purchase insurance through the exchanges than do the health care reform bills passed by other committees in Congress.
Plus, the committee's bill doesn't include a government-run insurance plan as an option in the exchange -- a proposal that NFIB, the chamber and many other business groups fear would undermine the private insurance market.
The Obama administration has not taken endorsed any of the bills over the others, but letting more small businesses participate in the exchanges is a "very positive" step, said Gene Sperling, a counselor to Treasury Secretary Timothy Geithner.
The exchanges would allow "a microbusiness to get health care with the same administrative costs as Microsoft for the first very first time," Sperling said.
Self-employed seek tax equity
Snowe, who is the ranking Republican on the Senate Small Business and Entrepreneurship Committee, and the panel's chair, Sen. Mary Landrieu, D-La., also hope to convince their colleagues to include tax equity for the self-employed in the final version of health care reform.
Self-employed individuals can deduct the cost of health insurance from their federal income taxes. But current law doesn't allow them to take this deduction before they compute their 15.3 percent self-employment tax, which covers both the employer's and the employee's share of Social Security and Medicare (FICA) contributions.
This situation costs a self-employed individual who pays $4,500 a year for health insurance an extra $688.50 in self-employment taxes.
"No other worker or employer in the United States is required to pay FICA taxes on any portion of their employer-sponsored health benefits," said Keith Ashmus, co-founding partner of Frantz Ward law firm in Celveland and chair of the National Small Business Association. "With health insurance costs already sky-high, our members find it unbelievable that the federal government would slap an extra tax on those who have the hardest time securing coverage in the first place."
This inequity is particularly troublesome since all of the health care reform bills before Congress require that self-employed individuals purchase health insurance, said John Arensmeyer, founder and CEO of Small Business Majority.
"In many cases, those who are already insured will be required to purchase greater coverage at additional cost," he said. "Yet the self-employed are at a disadvantage because the tax code does not allow them to fully deduct the cost of their health insurance, as larger businesses can."
The Congressional Budget Office estimates it would cost $33 billion over 10 years to provide tax equity to the self-employed on health insurance, Landrieu said. That's a lot of money, she said, but it's dwarfed by other expenditures in the health care reform bills, which are projected to cost $829 billion to $1 trillion or more.
Finding money this money may be difficult, but Snowe and Landrieu enjoy strong bargaining positions: Both of their votes are needed in order for health care reform to pass the Senate.