SAN FRANCISCO--(BUSINESS WIRE)-- The following is an opinion editorial provided by Karen Mills, administrator of the U.S. Small Business Administration, and Christina Romer, chair of the President's Council of Economic Advisers:

Health care is the No. 1 concern for small businesses today. The current system places a heavy burden on many small-business owners because it does not provide access to affordable coverage for them and their employees. Small businesses pay up to 18 percent more for coverage compared with large firms. These higher costs mean lower profits for the firm and lower take-home wages for employees.

A new report by the Council of Economic Advisers examines the challenges faced by small businesses under the current system and the likely benefits of reform for this important community.

COVERAGE LESS LIKELY

Because of the higher costs they face, small-business owners are far less likely to provide health insurance for their workers.

Less than half of firms with three to nine workers offer any type of coverage, while 99 percent of firms with 200 or more employees offer employer-sponsored insurance. As costs continue to rise, more small-business owners are reducing or dropping coverage.

Successful health care reform must improve access to affordable coverage for small-business owners and their employees. Health care reform, as envisioned by the President and the current draft legislation, does just that.

Proposals working their way through Congress include the creation of an "insurance exchange" where both small businesses and individuals can purchase coverage. By pooling risk and spreading administrative costs over larger numbers of people, the exchange will make available high-quality plans at affordable rates.

Current proposals also include a tax credit for small businesses that provide health care coverage for workers. This benefit will make it easier for small businesses to provide coverage.

Concerns continue to be raised over the so called "pay-or-play" fees that are designed to encourage firms to maintain employer-sponsored insurance coverage. The current proposals exempt small businesses from these fees. For example, the draft bill from the Senate Health, Education, Labor, and Pensions Committee exempts firms with fewer than 25 workers, which is more than 90 percent of all firms in the United States.


The truth is that most small-business owners want to provide health care coverage for their employees. They know the current individual insurance market places an untenable financial burden on their workers, whom they often view as family.

However, if a small firm decides not to provide coverage, the exchange provides a way for its workers to get quality coverage at affordable rates. Uninsured, low-income workers, who often work in small firms, will be able to qualify for subsidies to help pay for coverage. This approach is a win for workers who are at risk of being one illness away from financial disaster, and a win for small businesses, which benefit from a healthier and more stable workforce.

Health care reform will also help spur entrepreneurship and innovation. Today, some of the most talented Americans resist starting or joining a small business because of the lack of coverage or a pre-existing condition that would make them ineligible for coverage if they left their current job.

Removing this barrier will reduce this "job lock," bolster small businesses and drive overall economic growth.

LIGHTENING THE BURDEN

As the strongest drivers of job growth in the United States, small businesses have the potential to reinvigorate our economy. Today's broken health care system, however, places an unbearable burden on small businesses.

The reforms proposed by the president and working their way through Congress have the potential to address this crucial issue facing America's small businesses.

Release Number: 09-18



U.S. Small Business Administration (SBA)

Bob Borden, 415-744-1961

http://www.sba.gov/news

Source: U.S. Small Business Administration (SBA)