Small Businesses Face Monumental Choice on Health Care

Who should get health insurance, how should they get it, and who pays? Those three questions are at the forefront of the current controversy over health care and will provide the framework for the great debate that will begin once the presidential primaries end and the general election begins.

Small business owners, of course, have a huge stake in the outcome of both the election and the debate. Of the 47 million people currently without health insurance, the overwhelming majority either own or are employed by a small business. That means health care should be one of the key decision points for choosing the next president. So where do the presidential candidates stand and what does the public think?

Republican candidate John McCain and potential Democratic candidates Hillary Clinton and Barack Obama are offering small business owners very different approaches to the problem. In a nutshell, according to press reports, McCain wants to focus on reducing health care costs and leave it up to individuals to decide on the coverage they need. Clinton wants everyone to have health insurance, while Obama would only require parents to have coverage for their children.

McCain would shift the burden of providing insurance away from businesses and place it solely on the shoulders of individuals through a series of tax changes and wider use of Health Savings Accounts (HSAs). Insurance companies would be free to sell individuals as little or as much coverage as they need. Thus, young, healthy people might opt for a low-benefit package and pay less. Older individuals, who have more ailments or chronic diseases, would pay more. Right now most states require individuals to pay the same; in effect, the healthy subsidize the sick by pooling costs through what's known as a "community rating system."

Under the Democratic plan, large companies would have the choice of either providing benefits for workers or dropping their coverage, and paying a mandatory payroll tax to support a new government-administered system. According to Fortune magazine, the system would have two parts. The first would be a traditional, employer-sponsored system. The second would be similar to the plan offered to U.S. government employees, and would include the same generous menu of health options. Small business owners who are self-employed or lack insurance would go into this plan. Low-income Americans would receive subsidies to purchase the premiums.

Because of the uncertainty of rising health care costs, most experts believe corporations would sooner pay the payroll tax than provide health insurance, eventually forcing almost everyone into the government-run plan, which would be heavily regulated. While that seems to smack of "socialized" medicine, most government employees seem to be satisfied with their coverage.

Under McCain's plan, corporations would have to start paying tax on the cost of employee-provided insurance and would be free to pass that cost on to the employee. For a $12,000 plan, that would mean a $3,360 tax increase for a worker in the 28 percent bracket, according to USA Today. McCain would use a tax credit ($2,500 for individuals; $5,000 for families) to offset the tax on employer-provided coverage, or individuals could use it to pay for private insurance.

Instead of providing coverage, companies could raise employees' salaries by an equivalent amount to help them pay for it, although that's not a requirement. That money, theoretically, would go into an HSA. Then, the employee would negotiate for insurance on his or her own. In charge of their own health coverage, individuals would also theoretically pay more attention to how much they are paying for medical services and negotiate better rates.

Insurance companies, meanwhile, would be freed of regulations, such as state mandates, and would be allowed to compete nationally for customers. Such competition would supposedly lower costs and provide benefit packages more tailored to individuals. But experts note that McCain's plan fails to take into account people who are older but too young for Medicare, and those with pre-existing conditions. They would lose coverage or see their policies skyrocket in price if insurance companies deign to cover them at all.

That's basically where the presidential candidates stand. As for the public, a new survey by the Aspen Institute, a non-profit research organization, and Zogby International sheds some light on attitudes about the problem. Almost half of those surveyed (48 percent) said providing preventive health care to all Americans should be one of the cornerstones of health care reform. Another near majority (47 percent) said more affordable health insurance should also be a cornerstone.

The public seems to have little tolerance for people with "unhealthful lifestyles." A majority (53 percent) believe they should pay more for insurance, but most would stop short of penalizing them. Just 29 percent would favor such things as smoking fines or "fat taxes." About 80 percent, however, believe individuals should be rewarded for making healthful lifestyle choices through lower health insurance premiums, deductibles, or co-payments, the poll found.

Not surprisingly, concern over the current system runs high. An overwhelming majority (85 percent) said they are concerned or very concerned that they or someone in their family may not be able to get appropriate medical care. Nearly half (48 percent) said they or someone they know has suffered an illness, injury, or death that could have been prevented by better health care. Nearly half (49 percent) said they spend too much on health care for themselves and their family, and 54 percent believe the nation spends too much on health care.

Where does this leave small businesses? Between now and the election, business owners need to sort out the best option for them. The National Federation of Independent Business is holding forums around the country to discuss the options, and likely so are other groups. That's a good place to start. But the most important decision you make will be in the polling booth in November. Make sure you are fully informed. Remember, when you pull the lever in November, you'll be choosing more than the next president. Your health will be on the line as well.