Several small business groups are reeling at the Democrats’ health-care reform bill passed this weekend by the House, with some saying President Obama needs to step in and fight harder for the nation’s independent entrepreneurs.
“When it comes to the actual legislation, it seems the far-left in the Congress who really aren’t as interested in small business concerns seem to dominate the debate and the legislation,” Small Business & Entrepreneurship Council (SBE Council) CEO Karen Kerrigan told FOXBusiness.com before the vote. “I think if the president and his team really cared about small business, they would take a more active role in designing these packages.”
While Obama has stressed the $1.05 trillion bill, H.R. 3962, is fully paid for and will ultimately reduce the deficit, there are tax and mandate provisions that are frightening to the small business community, particularly since last Friday’s numbers show that U.S. unemployment rose to its highest level in more than 26 years last month, up to 10.2%. That’s a foreboding sign when it comes to just how fast the economy and labor market may pick up.
Groups such as the Small Business Majority are more supportive of H.R. 3962, pointing to certain adjustments that were made to it that they contend will help small business in particular.
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Those applauded adjustments include: adding short-term relief through a high-risk pool set to start in 2010, requiring insurers to justify premium increases to discourage price gouging, and adding a requirement that health plans spend at least 85% of premium dollars on medical care and individual plans available in the exchange that would save the 22 million self-employed 25% on their premiums in 2016.
But the SBE Council and National Federation of Independent Business’ point to several provisions, in particular, that they say could be the death knell for many of the nation’s entrepreneurs if this bill passes.
-Employer mandates that require employers to offer healthcare to full-time and part-time employees. Critics say the mandates will force unsustainable costs on small businesses already under pressure in this economy.
-Payroll tax penalty; the legislation requires that employers with a payroll of $500,000 or more pay a payroll tax of up to 8%, depending on their payroll, if they do not provide “qualified” health insurance. Critics say this is nothing less than a tax on jobs, and could cause businesses to cut wages or other benefits to find the money to pay the tax.
-"Pay-or-play" language that says businesses with payrolls of less than $500,000 are exempt from the payroll tax penalty, but the problem, critics say, is that those businesses will then get hit with new regulations governing “acceptable coverage,” and if the government dictates what type of plan they have to purchase, those plans could be more expensive than what the firm can afford.
Other areas of concern include: a temporary tax credit offered to “low-wage” small businesses; new reporting requirements; auto-enroll mandates; possible exposure to more lawsuits; and potentially more taxes on pass-through entities like LLCs or Subchapter S corporations, which make up 75% of the nation’s small businesses and pay taxes via income taxes instead of corporate taxes.
Republicans are also howling at these measures.
House Republican Leader John Boehner points to a recent Small Business Administration report that says the “exemption” for pay-to-play, for example, “hammers small employers with only, on average, 17 or more employees to new taxes and mandates.” He said the “job-killing employer mandates” like additional taxes on employers and new regulations over what is and isn’t acceptable coverage “will place new and crushing burdens on employers.”
The NFIB has said an employer mandate of this magnitude could disproportionately impact small businesses, triggering up to 1.6 million lost jobs, two-thirds of which would be lost by small businesses. The Wall Street Journal even called H.R. 3962 “the worst piece of post-New Deal legislation ever introduced.”
“The cumulative impact of the bill between its taxes, the mandates and the regulations, plus some of the things actually that it takes away from existing plans” – i.e. flexibility with flex savings accounts and health-savings accounts -- “is a negative for small business owners,” Kerrigan said. “The big takeaway … is just the cost. This bill, in terms of health coverage costs, really is going to do very little to nothing to help small business owners with their costs of health coverage.”
Michelle Dimarob, NFIB’s manager of legislative affairs, agreed, pointing to $167 billion in new taxes created by the employer and individual mandates alone.
“They’re taking the very miniscule amount of tools small businesses have in their toolbox and replacing them with something that at the end of the day, small businesses can’t afford and they’re doing it on the back of small business owners,” she said.
From grassroots efforts, meeting with lawmakers and sending messages to the White House that H.R. 3962 is a non-starter, NFIB pulled out all the stops.
The SBE Council specifically targeted Blue-Dog Democrats in attempts to convince them to vote “No.” The SBE and NFIB – along with the U.S. Chamber of Commerce - are among the 150 groups that make up the Small Business Coalition for Affordable Health Care, which is coordinating a larger grassroots effort that includes e-mails, phone calls and other methods of communication with congressional offices.
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“They’re very, very concerned about legislation they’re seeing coming out of Washington,” Dimarob said of NFIB’s members. “A tax here, a tax there - all of those have an impact on their business in totality … They already know that sense of urgency is there – they can feel it. I really do think they can help turn some of the votes that might have been ‘Yes’ votes into ‘No’ votes.”
But still, the bill passed the House Saturday by a vote of 220-215, with the SBE Council saying Democrats “ignored” the concerns of small business. Now all eyes will be on the Senate in hopes that the bill passed there will be more small-business friendly.
On Oct. 29, Obama told small business owners gathered at the White House that “the bottom line is that too many Americans like you can't afford to build the kinds of businesses you'd been hoping to build.” He then praised House Speaker Nancy Pelosi for the House bill, calling it a “critical milestone.”
“There is no doubt that this legislation, and the legislation that's being drafted in the Senate, would benefit millions of small businesses. It's being written with the interests of Americans like you and your employees in mind,” Obama said.
Obama also took issue with arguments like the one that says “pay-or-play” will lead to increased cost, saying about 90% of all small businesses under both the Senate and House versions would be exempt from this requirement.
But some aren’t convinced.
“In my view it’s not over,” Kerrigan said. “The end game seems to be down the road a little bit … but our hope is the White House will step up and give more than just rhetoric, really drive a stake for small business interests in the legislation.”