Health Care Overhaul Bills Would Benefit Small Businesses

L.D. Schmidt is a working man who arrives, in sickness and in health, at his small midtown Sacramento electronics shop to repair audio equipment.

Schmidt lacks health insurance, and hopes that the health care overhaul being debated in Congress will get him affordable coverage without driving up his costs of doing business.

Schmidt’s shop is among the tens of thousands of mom-and-pop firms scattered across America, enterprises whose proprietors often can’t even afford health insurance for themselves, let alone their workers.

“I just have to keep coming back to work, unless I get so sick and just can’t get out of bed,” said Schmidt, who operates Ray’s Auto Stereo.

His only employee, a 20-year-old who was kicked off his parents’ health plan last year, is paid minimum wage and can’t afford to buy his own health coverage.

About three in 10 of the state’s self-employed don’t have health insurance, and nearly 43 percent of those working in the state’s smallest firms – those that employ fewer than 10 people – are uninsured, according to the annual Health Care Almanac produced by the California HealthCare Foundation.

Nearly two in five of the state’s 7 million uninsured are either self-employed or work for some of California’s smallest companies, the foundation reported.

While large companies have the clout to negotiate lower premiums with insurers, individuals and small businesses aren’t accorded the same deals.

But pooled together under a proposed insurance exchange, this group would be better positioned to put pressure on insurers to provide lower prices, according to proponents of overhaul legislation. Part of the pressure would come from government, which would oversee the exchange.

Both Senate and House versions of the bill would allow small businesses with fewer than 10 employees to write off as much as half of what they contribute to their workers’ health premiums.

That would help Joann Mizutani, who has been providing health insurance to her only employee despite running huge losses on her gift shop, Joann’s Elegant Gifts, across from the state Capitol.

“Profit is not always my bottom line,” said Mizutani, who has run the business for 29 years with her husband’s financial backing. “If I ever worked for a small business, I’d like to have insurance. I live by the golden rule – you do unto others what you want done unto you.”

When Monica Garcia, 38, began working at the shop 13 years ago, she was thrilled at the prospect of getting health coverage. “I couldn’t believe it,” she said.

“I always tell her, because I know she’s struggling, that she doesn’t have to give me health insurance,” Garcia said of her employer.

“But then what’s she going to do?” Mizutani asked.

Garcia replied she would probably just go without health coverage.

Many small-business owners such as Schmidt have yet to delve into the mind-numbing specifics of the health care proposals. They frame their views by relying on the broad sweeps used by partisans to shape the politically driven discussion.

Schmidt doesn’t know quite what to think. He needs affordable health care, but expresses ambivalence over new taxes the government would impose on businesses to help finance the largest expansion of government health care since the 1960s.

Large business groups such as the U.S. and California chambers of commerce are lobbying hard against pending health care legislation.

But the vast majority of small businesses would benefit from the proposals, according to health advocates.

Most small businesses would be exempt from new payroll taxes and other potential penalties levied against larger firms that choose not to offer health coverage to their employees. At the same time, these small businesses could benefit from subsidies and the new exchange by allowing their uninsured workers to buy insurance from the exchange.

“They’re going to do better. Nobody can be turned down for insurance, and that’s going to help any self-employed person. An exchange that levels the playing field will give small businesses the bargaining power enjoyed by big businesses,” said John Arensmeyer, CEO of Small Business Majority, a think tank based in Sausalito.

“The proposals are substantially better than the status quo,” Arensmeyer said. “Right now, the status quo is a disaster for the smallest businesses.”

But the U.S. Chamber of Commerce calls the proposals in Congress flawed.

“Tax increases to pay for a public plan, employer mandates, and minimum coverage will do more than devastate the private insurance industry – they could bankrupt our economy,” according to a statement on the chamber’s Web site.

The House version of health care legislation would impose payroll taxes of up to 8 percent on larger companies – those with payrolls exceeding $750,000 annually – if they do not pick up at least 65 percent of premiums for employees with families or 72.5 percent for employees without dependents, according to an analysis by the Kaiser Family Foundation.

Companies with payrolls falling below $500,000 a year would be exempt.

The National Small Business Association has taken a more moderate view of reforms than some other business groups, but expresses concern about the burden the legislation could impose on small employers.

“We haven’t come out and endorsed it, but we haven’t come out against it, either,” the association’s spokeswoman, Molly Brogan, said of the Senate bill.

“More people will have access to health insurance, but they haven’t done anything about costs,” she said. The legislation could help some businesses and their employers better afford premiums, she said, but in other cases could make things more expensive.

“It remains to be seen,” she said.

Premium costs make health insurance too expensive for Schmidt and his only full-time employee, who gets help from his parents for doctor’s visits.

While his employee has the luxury of calling in sick, Schmidt does not.

Two years ago, Schmidt had to go to an emergency room because of a severe leg infection. Now he walks with a limp. At 60, staying healthy is a growing challenge, he said.

“I don’t want to see the insurance guys go out of business,” he said, “but they’re plenty fat.

“All I want is some kind of health care insurance,” he said. “I don’t mind paying a little to get it. Right now, everything’s just too expensive.”