Health care reform does next to nothing to reduce the cost of health care

Analysis by SBAM health insurance expert Scott Lyon.

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As most of you have probably know, late on Sunday evening the U.S. House of Representatives passed the Senate health reform bill, as well as the reconciliation language making changes to that bill. The vote was close with 38 Democrats voting “no” along with every Republican on the Senate bill and 33 Democrats voting "no" on the reconciliation bill. All of Michigan’s U.S. House of Representative members voted along party lines (Democrats “yes” and Republicans ‘no”).

Within the legislation, the root cause of the nation’s issue with health care – cost - was almost completely ignored. As far as SBAM is concerned, the issue of cost containment is critical, and the reality is that this bill does next to nothing to reduce the cost of health care, which is, of course, the driver of health insurance costs.

The next step will be for the Senate to take up the reconciliation language, which is expected to begin on Tuesday. So what we have right now is:

The Senate bill has now been passed by both the House and Senate, which means it will become law as soon as it is signed by President Obama.


The Senate is working on the Reconciliation Bill and that could be completed this week. That is, if no changes are made to the House language. If there are changes it could stretch on for weeks because then it must go back to the House for a final vote.

To best of our ability, SBAM will keep you informed of what is going on or changing along with some analysis on how this will impact our small businesses members and their employees.

In broad strokes, here is what is in this monster:

For small businesses and individuals:

  • Individual Mandate that requires most U.S. citizens and legal residents to purchase insurance. There are subsidies for low income people and penalties if you don’t purchase.
  • Employer Mandate for any employer with more than 49 employees with penalties if the employer does not offer coverage
  • Health Insurance Exchange portal where individual and small employers can review and purchase insurance.
  • Expansion of Medicaid and CHIP.
  • Small business tax credits for companies with fewer than 25 employees and average annual wages of less that $50,000 if employer pays more than 50% of the premium – note that it phases out for companies above 10 employees and as the average wage increases.

New fees that will impact premiums:

  • New fees on pharmaceutical companies of $16 billion between 2011 and 2019, then $2.8 billion a year thereafter.
  • New annual fees on health insurance companies of $47.5 billion between 2014 and 2018 and then indexed by the previous year’s fee increased by premium growth.
  • New fees on taxable medical devises of 2.9%.
  • Exclusion of the cost of over-the-counter medication from your HSA or FSA effective 2011.
  • Increases the threshold to itemized deductions for medical costs from 7.5% to 10% in 2013.
  • Limits the amount of contribution to a FSA to $2,500 effective 2013.
  • Increases the Medicare Part A tax from 1.45% to 2.35% for individuals making over $200,000 and families above $250,000 – so look out if your business is a pass through.
  • “Cadillac Tax” starting in 2018.

Insurance carrier related changes:

  • Co-Op Plan in each state – non-profit member-run health insurance plans – I think they are

SBAM Prevails on Post-Labor Day School Start

SBAM’s top legislative priority in the last week of the legislative session was preserving the law that schools in Michigan cannot start until after Labor Day. 

As we reported in our last issue, the legislature was working on education reforms to qualify for the Race to the Top federal program.

House versions of the bill included provisions that would have allowed schools to begin prior to Labor Day.  Because of the importance of tourism in Michigan and the shortening of the tourism season that this would have caused, we worked to keep this out of the final bill.

We are proud to report that because of our efforts and those of the tourism industry, we were able to defeat those efforts.  Special thanks goes out to State Senator Wayne Kuipers in assisting us in our efforts.

The bills passed the legislature without the Labor Day language in a prolonged weekend session.

Way Cleared for U.S. Senate Vote on Healthcare Bills

Also over the weekend, the Democrats in the U.S. Senate were able to end debate on their healthcare reform bills.  The measure passed with the minimum 60 votes needed.

This action clears the way for a vote on the bills later this week.  It is expected that there will be a vote on the bills on Christmas Eve. 

Support for the bills has soured among the American people as polls indicate that as much as 60% of the electorate do not support the bills.

If the bills do pass this week as expected, there will still be more obstacles to overcome.  The House and Senate versions differ on a number of important issues so they will likely be sent to a conference committee where those differences must be ironed out.

We will keep you posted on the progress of the bills.  SBAM continues to oppose the bills in their current form as they do little to reduce the cost of healthcare and place many burdens on small business.

Reforms to Top Legislative Agenda in the New Year

SBAM has been calling on state legislators and the administration to make government reforms for most of this year.  It appears that the Speaker of the House and the Senate Majority Leader agree that reform legislation should be the priority in the first few months of 2010.

Speaker Andy Dillon announced last week that his priority for the new year will be to tackle government reforms early.  Senate Majority Leader Mike Bishop has also called for reforms to move next year.

It remains to be seen what reforms will come up and even more importantly, which ones have the bi-partisan support that will be needed.

The state is currently facing a projected $2.8 billion dollar deficit for next year.  By doing the reforms early, hopefully the legislature can alleviate some of the pressure of balancing the state budget next summer as legislators gear up for the election season.

SBAM will continue our efforts to fight for meaningful reforms and the elimination of the MBT surcharge next year.

SBAM in the news

  • In The Detroit News: SBAM's Vice President Communications Michael Rogers says "...many small businesses don't know how to navigate the language, legal and commerce barriers to exporting goods to other lucrative markets such as China and Latin America." Read more here.
  • SBAM's chair Mike Fox, CEO of Ingenuity IEQ of Midland, noted in Midland Daily News column on businesses calling for bold structural reform of state government. Read more here.
  • Michigan Policy Network interview with SBAM President and CEO Rob Fowler.