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New health care reform law has significant shortcomings for small business owners

March 24, 2010

(SBAM wants to know how the new law
will affect your small business! Tell us in the comment section at the
end of this story — or contribute your views to our


The National Small Business Association (NSBA), SBAM’s national affiliate, says that the law will place significant new pressures on small businesses to both offer and pay for employee health insurance, starting in the earliest stages of reform. However, the provider-level reforms that could contain costs and enable small businesses to afford this commitment will not be fully effective for many years—if at all. The Association says that small companies caught between these twin pressures will see their ability to grow, prosper, and create jobs greatly diminished.

Additional shortcomings of the new law, according to NSBA:

  • Small business health premiums will continue to increase sharply, as even the Congressional Budget Office has determined.
  • The legislation does nothing to encourage cost-conscious consumer behavior, aside from the unnecessarily blunt “Cadillac tax,” which will not begin to have an effect until at least 2018, and which is insufficiently transparent and imposes unintended administrative burdens on small businesses.
  • The previously mentioned delivery system reforms are positive, but are too back-loaded, giving powerful vested interests years to water them down or remove them entirely. Even if implemented, they are not likely to have a significant effect on costs for a decade or more. Malpractice reform, absent from the current legislation, would make these reforms much more effective.
  • Though currently excluding most small companies, the large increases in “free-rider fees” are troubling. If there was once a distinction between an employer mandate and a free-rider provision, it seems to have been lost.
  • The very large tax increases on both earned and unearned income could have a significant effect on many small business owners and their ability to reinvest in their companies’ growth. These increases are in addition to the administration’s current budget proposal, which calls for significant income tax increases on the same individuals. Together, these taxes will create a steep increase in marginal tax rates on the very entrepreneurs we need to be investing and creating jobs.
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