Will Healthcare Reform Backfire for Small Businesses?

By Carol Tice

The point of healthcare reform -- the big point -- was to get more Americans insured and using preventive medicine. Fewer people showing up in emergency rooms with head colds would save our country a bundle, not to mention cutting sick days and adding to worker productivity.

So now we have healthcare reform. But there are questions about whether the changes the bill mandates will really get more people insured.

By 2014, small businesses are supposed to offer their workers health insurance or pay a $2,000 penalty. The troubling thing -- there are rumblings that for the most part, small businesses plan to pay the penalty.

Consultants who spoke at a couple different recent restaurant-industry conferences, in New York and Los Angeles, said their clients were planning to pay the penalty rather than start offering healthcare. Restaurant operators who offer healthcare were grappling with nearly 30 percent increases in their premiums, so that's probably a factor.

The reform bill included a 50 percent tax credit on healthcare premiums for smaller companies, with 10 or fewer workers. But apparently many business owners don't think that's going to be enough to make it work.

I found this news troubling, and wanted to look into how business owners are feeling about providing insurance. So I took a poll of my own on Entrepreneur's Daily Dose blog, asking small business owners if they planned to offer healthcare or pay the penalty. It was a pretty small poll -- about 50 business owners participated -- but results were similarly negative.

Only 16 percent of respondents said they planned to provide health insurance by 2014. More than twice as many -- 36 percent -- said they plan to pay the $2,000 penalty instead. Another one-quarter of respondents hadn't decided yet, and 16 percent already offer health insurance. Eight percent were undecided.

It's early to know, but given how premiums have been rising, it's likely that a $2,000 penalty will work out cheaper than providing healthcare coverage, especially four years of premium increases from now. But it's got to be getting within spitting distance of offering healthcare. It's also a major perk that helps retain workers when you provide healthcare.

Sure, if every small business pays the penalty, we'll end up with a pretty substantial pool from which to help provide healthcare services, or to help subsidize state pools to cover uninsured workers. But it's not really the ideal answer.

Possibly, many small businesses are simply of a type where offering healthcare just isn't going to happen. Yes, Starbucks offers part-time workers health insurance, but for most companies with only a handful of employees, the costs will remain burdensome, even with reform.

With the shift in leadership in Congress that happened in the elections, some are hoping healthcare reform can still be repealed. If it's not really going to accomplish its goals, maybe it's time to take another look and design another program to make it happen.

What do you think? Will you pay the penalty, or provide healthcare? Leave a comment and tell us how you'd fix healthcare.

Photo via Flickr user boliston