According to a recent NFIB article, likely health care reform will take one of five different directions and the impact to small business employers will be impacted differently by each.
The five most common ways discussed to structure health care reform are as follows:
1) Employer Mandate – Requires employers to a) provide a fixed percentage of employee health care costs, b) a fixed percentage of payroll to go towards the purchase of health insurance, or c) “pay or play” option where employers who don’t contribute must pay a special tax.
2) Single Payer System – A single payer such as the federal government would tax both employers and individuals in return for providing health care. This is the type of system in Canada.
3) Exchange / Connector – A public / private partnership where subsidies are offered for low income individuals to purchase discounted benefits through a forced consolidation of individual and small group markets.
4) Individual Mandate – An individual requirement to obtain health insurance either through their employer or on their own through government run plans.
5) Tax Equality – Inequalities would be ironed out of the tax system which currently favors employer provided insurance where the employer gets to deduct 100% of costs and the employees pay their portion with before tax dollars. However, individuals currently purchasing insurance on their own gain no tax advantages. In addition, the self employed are penalized by paying for their insurance with after tax dollars as they can’t deduct and pay a 15.3% payroll tax on their premiums.
The debate on this crucial issue will need to be watched closely as the consequences would be severe in terms of tax burdens and loss of jobs due to many small businesses becoming uncompetitive.
Source: NFIB, My Business, April/May 2009,