The Economic Impact of Healthcare Reform on Small

Business

Presentation by Ben Geyerhahn

Small Business Majority

Small Business MajoritySmall Business Majority

• Small Business Majority is a national nonprofit organization, founded and run by small business owners, that brings the voice of America’s 28 million small businesses to the public policy table.

• SBM is focused on solving the single biggest problem facing small businesses today: the skyrocketing cost of healthcare.

• SBM uses scientific research to understand and represent the interests and needs of all small businesses, from sole proprietors to 100-person companies.

Why Did We Commission this Study? Why Did We Commission this Study?

• More than any other sector of the economy, small business suffers from our broken healthcare system.

• Spiraling costs and inadequate access to high-quality healthcare are slashing profits and hurting growth.

• The cost of doing nothing is simply too high to contemplate.

Small Business and HealthcareSmall Business and Healthcare

• Approximately 70% of those people who are working full-time and have no healthcare work in small business.

• There is an inverse relationship between the size of a company and the likelihood that it offers healthcare.

• In New York, small businesses on average pay 18% of payroll to satisfy health insurance premiums.

The StudyThe Study

• SBM commissioned MIT economist Jonathan Gruber to model the impact of 4 reform scenarios on small business costs, jobs, wages and profits compared with that of no reform.

• Dr. Gruber analyzed several reform scenarios from across the ideological spectrum:

• Baseline: no change to current system

• Two Shared Responsibility Scenarios

• Single-Payer

• Market Reform

The Perspectives of NY Small BusinessesThe Perspectives of NY Small Businesses

• Characteristics that drive healthcare premium decisions:

– Size:

• Smaller businesses are less tolerant of premium increases and additional paperwork driven by plan complexity.

– Profit margin:

• Businesses with high profit margins view healthcare as a tool to attract employees where low profit-margin businesses view healthcare through the prism of cost alone.

– Firms offering and not offering health insurance:

• The impact of taxes, fines or other devices utilized by various healthcare reforms varies substantially based on whether a business is or is not offering health insurance. For those not offering, this is a cost that can derail them; for those that are, these fines or taxes are a nonissue.

Detailed FindingsCost of Health BenefitsDetailed FindingsCost of Health Benefits

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018$0

$20

$40

$60

$80

$100

$120

$140

$160

$180

$10.4

$21.7

$34.0

$47.4

$61.8

$77.5

$94.7

$113.4

$133.5

$155.6

No Reform

Billi

ons

Without reform, small businesses will spend $155.6 billion on health benefits from 2009 through 2018.

Cumulative Cost of Health Benefits to New York Small Business: No Reform

Detailed FindingsCost Savings Under ReformDetailed FindingsCost Savings Under Reform

$(20.0)

$(10.0)

$-

$10.0

$20.0

$30.0

$40.0

$50.0

$60.0 $50.2 $50.6

$(13.3)

$38.9

Cumulative cost savings from reform

Shared Responsibility (Payroll)Shared Responsibility (Employees)Single PayerMarket Based Reform

Billi

ons

Detailed FindingsJob Loss Due to Health CostsDetailed FindingsJob Loss Due to Health Costs

2009 2010 2011 2012 2013 2014 2015 2016 2017 20180

2

4

6

8

10

12

1

2

3

3

4 4

6

7

8

10

In 2018, small business job loss due to healthcare costs in New York will be equivalent to 10,000 full-time employees.

New York Small Business Job Loss Due to Health Costs Per Year: No Reform

Thou

sand

s

Detailed FindingsJob Loss Impact Under ReformDetailed FindingsJob Loss Impact Under Reform

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Shared Responsibility (Payroll) 0 1 2 2 3 3 5 6 7 8

Shared Responsibility (Employees) 1 2 3 3 4 4 6 7 7 8

Single Payer 10% payroll -12 -3 -2 -2 -1 -1 1 2 3 5

Market Based 1 2 1 1 2 2 3 3 4 3

(13)

(8)

(3)

3

8

Small Business Job Loss Relative To No Reform Per Year

Thou

sand

s

Detailed FindingsWages Lost Due to Healthcare CostsDetailed FindingsWages Lost Due to Healthcare Costs

2009 2010 2011 2012 2013 2014 2015 2016 2017 20180

2

4

6

8

10

12

$0.8 $1.6

$2.6

$3.5

$4.5

$5.6

$6.8

$8.2

$9.5

$11.2

New York Small Business Wages Lost Due to Healthcare Costs Per Year: No Reform

No Reform

Billi

ons

In 2018, annual small business wages will fall by $11.2 billion.

Detailed FindingsWages Saved Under Reform ScenarioDetailed FindingsWages Saved Under Reform Scenario

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

No Reform 0.791 1.583 2.56 3.514 4.456 5.564 6.846 8.202 9.495 11.235

Shared Responsibility (Payroll) -2.303 -1.636 -0.972000000000001

-0.22 0.562000000000001

1.396 2.429 3.453 4.426 5.707

Shared Responsibility (Employees) -2.333 -1.703 -1.006 -0.274 0.522 1.334 2.332 3.366 4.302 5.534

Single Payer -2.901 -0.694 -0.287 0.096 0.534 0.867000000000001

1.143 1.452 1.828 2.142

Market Based Reform -1.415 2.459 2.471 2.482 2.498 2.498 2.524 2.537 2.533 2.541

-$3

-$1

$1

$3

$5

$7

$9

$11

Billi

ons

New York Small Business Wages Lost Due to Healthcare Costs Per Year

Detailed FindingsProfits Lost Due to Healthcare CostsDetailed FindingsProfits Lost Due to Healthcare Costs

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 $-

$0.10

$0.20

$0.30

$0.40

$0.50

$0.60

$0.05 $0.08 $0.09

$0.09

$0.16

$0.24

$0.30

$0.38

$0.46

$0.55

No Reform

Billi

ons

In 2018, annual small business profits will fall by $550 million.

New York Small Business Profits Lost Due to Healthcare Costs Per Year: No Reform

Detailed FindingsProfit Savings Under ReformDetailed FindingsProfit Savings Under Reform

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Shared Responsibility (Payroll) -0.062 -0.023 0.012 0.022 0.085 0.166 0.214 0.284 0.352 0.4

Shared Responsibility (Employees) -0.095 0.022 0.033 0.039 0.075 0.165 0.201 0.28 0.349 0.407

Singler Payer -2.056 0.022 0.033 0.039 0.075 0.165 0.201 0.28 0.349 0.407

Market Based Reform 0.005 0.037 -0.00900000000000001

0.02 0.047 0.091 0.183 0.245 0.312 0.193

$(2.25)

$(1.75)

$(1.25)

$(0.75)

$(0.25)

$0.25

$0.75

Profits Relative to no reform

Billi

ons

Detailed FindingsProfit Savings Under ReformDetailed FindingsProfit Savings Under Reform

$(0.50)

$-

$0.50

$1.00

$1.50

Cumulative profit benefit relative to reform

Shared Responsibility (Payroll)

Shared Responsibility (Employees)

Singler Payer

Market Based ReformBilli

ons

ConclusionConclusion

• America’s small businesses are suffering under the current healthcare system

• A system based on shared responsibility among individuals, businesses, government and the healthcare industry that:

• Substantially contains cost• Guarantees access to coverage• Offers appropriate assistance to small businesses

will save small businesses hundreds of billions of dollars in costs, protect small business wages and jobs and allow small business owners to reinvest in and grow our economy.