Congress may require small businesses to play or pay for health insurance for employees

At this point in the health care reform debate, both the House and the Senate have put forth proposals for a "play or pay" mandate for employers, including small businesses, to provide health insurance for their employees. One of the Senate committees working on health care reform, the Senate Committee on Health, Education, Labor and Pensions (HELP), released its portion of the bill on Wednesday, July 15th, and, like the House bill released on Tuesday, it contains the mandate for employers and individuals. The HELP Committee bill will require businesses with 25 employees or more to offer health insurance or pay a fee (currently slated at $750 a year per full-time worker) to the federal government. Individuals would be required to obtain coverage. The Senate Finance Committee is still working on their portion of the bill.

The House bill, introduced by Democrat leaders, exempts only small businesses with payrolls of less than $250,000. The bill, America's Affordable Health Choices Act, H.R. 3200, will go to the floor for debate and possible amendments and a vote is expected before the House goes into their August recess.

Under the House bill, the payroll penalty would then phase in starting at 2 percent of payroll for firms with annual payrolls over $250,000 rising to the full 8 percent penalty for firms with annual payrolls above $400,000. In addition, a new small business tax credit will be available for those firms who want to provide health coverage to their workers.

Employers that choose to offer coverage must meet minimum benefit and contribution requirements specified in the proposal. Employers would have to pay 72.5 percent of the premium for individual coverage and 65 percent of the premium for family coverage, according to a Business Insurance report, reports.

In a new report, the Congressional Budget Office said that such "pay-or-play requirements" could result in the hiring of fewer low-wage workers. "Employees largely bear the cost of health insurance," the budget office said, according to The New York Times. But, it added, "employers cannot reduce wages for workers receiving the minimum wage, so "a play-or-pay provision could reduce the hiring of low-wage workers."

Small business groups have reacted to the low thresholds for penalties, The Wall Street Journal reports. "This bill costs too much, it covers too few and it has way too much government involvement," said Michelle Dimarob, a lobbyist with the National Federation of Independent Business, the main trade group for small firms. "Small business doesn't want any of those things."

Most small business owners support heath care reform that will control costs, and favor the individual mandate, in part because of the potential administrative burden they face with employer-provided coverage. Some view the employer mandate as working in favor of larger employers like Wal-Mart, which supports the idea. The National Retail Federation on Monday directly criticized Wal-Mart for endorsing mandated health care. "Such a plan," the retailers lobby said in a letter to members quoted in a Chicago Tribune report, "would be catastrophic for our industry."

Connie Swartz, owner of Creative Courseware, a small Kansas City company, said she was "out of the business of health care." She buys her own policy and expects her employees to do likewise.

"It just seems odd that employers, especially small businesses, have to be involved in health care, mainly because of the complexity involved," Swartz said in an interview with "My preference is to promote good health, but why can't that be done individually, the way life insurance or car insurance is handled?"

The House Bill summary claims to have addressed these concerns to some extent, but details of how the bill will reduce costs and administrative burdens have not yet come to light.


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