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Read our lips: small business says 'no thanks' to bearing brunt of health care reform.

WHEN IT COMES TO PAYing for an overhaul of the nation's health care system, small business owners are delivering a message that President Clinton should recognize: "Don't tread on us."

Small business groups such as the National Federation of Independent Business mobilized almost immediately after the President's Task Force on Health Care Reform floated the idea of bankrolling the changes, at least partly with a 7-10 percent payroll tax. They say such reform proposals would put independent businesses at a disadvantage against national competitors and place thousands of jobs at risk.

"We're the one group that got out front in a hurry |to say~ that the way it was being put together at the front end was going to be a disaster for small business," says Bob Wimberley, Arkansas director of the NFIB. "And small business is the glue that's holding the economy together in this country."

Although no final reform proposal has emerged, the small business community is on the offensive and their persuasive efforts may be effective. The administration appears to be backing away from putting the health care burden solely on employers' backs.

Both the president and first lady Hillary Rodham Clinton, who heads the task force, have said publicly in recent weeks that any administration proposal would be funded by a combination of employer and employee premiums.

"They're beginning to realize that mandating a law that relates to any small business is a very dangerous thing to do," says Wimberley, who, along with other Arkansas business people, met with the state's politicians earlier this month at the NFIB 50th anniversary meeting in Washington. The group also met briefly with President Clinton, who addressed the gathering.

Jobs at Risk

The NFIB, with more than 6,000 Arkansas members and 627,000 nationwide, stresses the results of a study it commissioned that examined the effect on employment of five approaches to health care reform.

Two of the five approaches posed no significant threat of job loss. However, others that would require employers to pick up all or most of the tab for health care coverage were found to place anywhere from 81,000 to 188,500 jobs "at risk" in Arkansas alone.

"Jobs are classified as being 'at risk' when the cost of mandated coverage would threaten the survival of the business," Wimberley says. "Probably only 8-10 percent of the at-risk jobs would be lost outright.

"But workers who keep their jobs in at-risk firms would most likely see fundamental changes in their terms of employment -- lower wages, fewer hours, reduced benefits and increased layoffs -- as business owners struggle to find ways to reduce operating costs to pay for the mandated expense of coverage."

Although the NFIB has risen up against the prospect of requiring small businesses to bear more insurance costs, Wimberley emphasizes that the group is not against changing the health care system. The NFIB supports measures to curb the cost of health care, believing it is high costs and volatility within the system that are at the root of the health care crisis.

An actuarial consultant in the field of employee benefits agrees.

"The delivery of health care is too often based on the profit motive rather than what is really needed for the patient," says Warren Smith of Werntz & Associates Inc.

Smith says the private sector has fallen short in making affordable health care available to all businesses and in controlling costs, and his clients have seen the results. One of them, a national association of several thousand employers, has had 10-15 employers drop health insurance completely because costs had simply become too prohibitive.

Smith says his clients, both big and small businesses, have asked what they should expect from health care reform. What does he tell them?

"I don't know what the political realities are and what's going to be permitted," he says. "So as far as advising my clients, I try to tell them what's being discussed and tell them to stay tuned. It's really so much in a state of flux that you can't predict what's going to happen."

Smith does believe, however, that the cost will be shifted to the private sector in some form.

And that's what small business owners fear.

The Payroll Bite

Consider the case of one small business owner, an equipment rental company with 122 full-time and 73 part-time employees. Like nearly two-thirds of small businesses, this one offers a no-frills health care plan split evenly between the employer and employee. With a monthly cost to a single employee of $71.80 and $179 for a family, only 70 employees participate.

If this employer paid a 7 percent payroll tax to fund health care, it would pull $140,000 from his annual payroll. Small business advocates say that bite would be reflected through higher costs passed on to consumers, scaled-back operations and, of course, fewer employees.

Most small business owners are concerned because they don't have sizable profit margins and generally take what's left over.

Some such as Wally Gieringer Jr., managing partner of La Scala restaurant and The After Thought lounge in Little Rock, are managing to provide health care on a cooperative basis. Gieringer says his restaurant and bar offer major medical insurance to employees after 90 days. After one year, the company pays 25 percent of the cost, that increases to 50 percent after two years.

It's hard enough to provide some coverage, he notes, but it could be worse.

"It would be a tremendous burden if I were required to pay 100 percent of their insurance premiums," Gieringer says.

"I would be further at a disadvantage from national restaurants who have buying power," he adds, vocalizing a major fear of independent business operators.

He says many small businesses like his are willing to accept the risks of self-employment because of the personal satisfaction derived. But if the risk quotient is further compounded, Gieringer says, there will be fewer independent businesses willing to carry on and a diminished number of business start-ups.

With the Clintons hearing a groundswell of such voices, the prognosis for small businesses may improve even before a reform package comes out of the operating room.
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Title Annotation:Health Care Update
Author:Walters, Dixie
Publication:Arkansas Business
Date:Jul 26, 1993
Previous Article:Filing in a flash: electronic claims help ease paper burden on doctors' offices, insurance companies.
Next Article:Measuring fallout: study sees silver lining in health care reform.

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