REFORM: Taking Care of (Small) Business

The director of New America's Health Policy Program, Len Nichols, testified today before the House Committee on Small Business at a hearing on "Making Health Care Reform Work for Small Business." We'll post his full written testimony soon. You can see Len's testimony below, and watch highlights from the rest of the hearing here.

Len praised Chairwoman Nydia Velázquez and her co-sponsors on the CHOICE Act, as well the co-sponsors of the SHOP Act, for taking a bipartisan approach to health reform for small business and proving we can do better than the partisanship of the ‘93–‘94 efforts.

The hearing's witnesses were asked to provide insights into how we can structure a system to work better for small businesses. Three common themes developed from the testimonies. They are:

1. The current system doesn't work for small businesses. Loading fees and administrative costs are much higher (and risk pools are much smaller) in the small-group market creating a disadvantage for small businesses against larger domestic firms and growing international competition. Small businesses are engines for growth and innovation. They should be in the business of producing new jobs and increasing productivity—not necessarily worrying about health insurance.
2. Think about creating a marketplace that could work for all Americans. The insurance market reforms that will help small business are the same measures that will help all Americans. Both the SHOP and CHOICE Acts take some important steps to create a marketplace that is accessible, competitive, and fair. The key Len argued, was removing the incentives for risk selection and underwriting so that insurers make money by delivering high value per health care dollar and having better health services. He suggested an individual requirement to purchase health insurance could help accomplish this and make a market that works for all Americans.
3. Subsidize workers not firms. Len and other witnesses noted that we can get more bang for our subsidy buck by targeting low-income workers rather than their employers. This is because subsidizing firms would inevitably direct some portion of the subsidy to employers with high wage workers (like law firms or consultancies). However, these firms would likely offer health benefits even without the subsidy. In addition, further subsidizing employer-sponsored insurance at a time when health care costs create an economic disadvantage for our employers in a competitive global economy seems counterproductive to our nation's overall economic goals.

Len also posited that no health reform proposal could be sustainable without finding a way to bend the cost curve to deliver more value per health care dollar. To hear more about ways to deliver higher quality care at lower costs, check out New America's event tomorrow: Health Care Quality: A Reform Issue For Every American.