Our health care system is in trouble; we can all agree on that. We can also agree that having over 44 million Americans without any form of health insurance is simply unacceptable.
But when it comes to who we should blame for the problem, and how it should be fixed , well, that’s a little more complicated.
As Congress once again addresses health care reform in these coming months, and as the presidential candidates cover it as a topic of debate and posturing, I think it’s critically important to start at the beginning. This means looking at who the uninsured are.
Are the uninsured the very poor? No , the very poor are covered by Medicaid. Are they the very well-off? No , the well-off have private health plans, sponsored by their (often large) places of employment.
The uninsured are mostly in the middle to lower-middle class. Three out of five of them are either self-employed or have a family head who works for a small business.
Placing The Blame
The blame for this does not rest on insurance companies or small employers, but on the government rules and regulations , designed with the best of intentions , that have made purchasing health insurance much more expensive and complicated than buying any other form of insurance. Those rules are also unintentionally biased against the self-employed and the employees of small businesses.
For example: If you are self-employed and therefore buying your own insurance, you are able to deduct 60 percent of the cost of your health insurance from your taxes. But if you are an employer buying insurance for your employees, you are able to deduct 100 percent , it is a pre-tax purchase.
In the third scenario, if you are working for a company that does not provide benefits, and you therefore buy them on your own, your deduction is , zero. So buying your own insurance is treated very differently, by tax law, than having your employer buy it for you. This tax treatment makes it far more expensive for those without employer-sponsored plans.
Many argue that employers must bear the burden; if they don’t provide health insurance for their employees, they ought to! But it’s America’s smallest businesses that aren’t providing, and it’s not because they don’t want to. It’s because they just can’t afford to.
Little Purchasing Power
No one wants to provide health insurance to their employees more than small businesses. But they don’t have the benefits that large companies and labor unions have in terms of the purchasing power that comes with economies of scale and a larger risk pool.
This is a terribly frustrating problem. But it is not without a solution. This year, Congress has a unique opportunity to begin turning things around for small business owners and their employees.
They can allow the creation of Association Health Plans (Haps) that will level the playing field of health-benefits purchasing by allowing small businesses to band together, across state lines, to purchase their insurance. This will allow small firms to enjoy the benefits of economies of scale and a larger risk pool, thus reducing the cost of their premiums and decreasing the number of uninsured Americans by as much as 8 million , all at no cost to taxpayers.
Congress can also change tax laws to expand the deductibility of health insurance so that both the self-employed, and individuals without an employer subsidy, may receive an immediate 100 percent deduction for the cost of their health insurance.
Some of the big insurance companies are against Haps because they are afraid Haps will create too much competition for customers (something that, in this country, is traditionally valued for bringing lower costs and better service to consumers). But with this unique opportunity to help the uninsured, I sure hope Congress listens to small business, and not to big insurance.
Farris is president of the National Federation of Independent Business.