Third in a Series: James Eckstein has had firsthand experience with the health insurance crisis, both as a small employer and as an executive with his national trade association. He is president of CA Eckstein Roofing, a Cincinnati firm with 35 employees, and vice president of the National Roofing Contractors Association, which represents his industry.
The way he sees it, two of the most significant challenges facing small employers are the high cost of providing comprehensive health insurance to employees and the volatility of premiums. For his firm, providing coverage is becoming increasingly difficult each year because his health insurer continues to sock his company with double-digit premium increases.
“Our most severe problem now is that insurance companies are unwilling to provide us with competitive pricing because of cancer and other health conditions among a few of our spouses and families,” he told the House Small Business Committee during a recent hearing.
Presidential candidates Barack Obama and John McCain have put forth health insurance plans that they say will address problems facing Eckstein Roofing and other small employers that currently provide health insurance. But that’s only part of the problem. Most small employers provide no coverage at all. And the plans must also take into account a workforce that is aging and increasingly mobile.
“It is clear from our situation at CA Eckstein Roofing, and based on the experience of many other small businesses, that some form of expanded pooling is absolutely necessary in order to spread risks across greater numbers of insured lives,” said Eckstein.
Although I don’t know Mr. Eckstein’s political persuasion, it’s clear that the health insurance crisis for him is very real. Here’s a look at how he and his business would fare under the McCain plan. Next week, I’ll examine how the Obama plan would affect him and other small businesses.
Under both plans, Eckstein would have the option of no longer providing health insurance at all. But under the McCain plan, he most likely would be forced to drop coverage because the tax break he currently receives for subsidizing health insurance premiums for his workers would vanish.
The McCain tax hike could cause employers to drop coverage for more than 20 million workers, according to one widely cited study by University of Michigan economists that was recently published in the journal Health Affairs.
Instead, his workers, including himself, would receive an individual tax credit — $2,500 for individuals and $5,000 for families — and would be told to purchase insurance on their own. The average cost of health insurance per employee today is about $12,000 for a family plan. Of that, employers typically pay $9,000 per employee.
The McCain plan assumes that Eckstein would take the money he saves from no longer paying premiums and pay his workers higher wages by an equal amount. After taxes, that $9,000 would be cut to about $6,000. The tax credit and the pay increase would roughly equal the cost of a private health insurance policy.