Proposed Health Plan a Disaster for Small Business

health care planIf the government health plan proposed by Congress makes it into law, it will devastate at least one small business owner who called me this week.

His business has 20 employees, each making about $25,000 a year in retail positions that typically attract younger, entry-level workers. He currently can’t afford to pay health insurance. Under the proposal, he will either have to pay an 8% tax on his $500,000 payroll, which will cost $40,000, or provide health insurance, which may cost even more. The owner’s gross salary and profit is $120,000 a year, or $100,000 after taxes.

He is considering four options:

1. If he can find a job paying over $60,000 with a competitor, he would be better off to take it and close his business. Why take all the risks and pressures of running a business when he could make the same money working for someone else? Of course, his 20 employees would lose their jobs, which certainly wouldn’t help them buy health insurance.

2. Another option is to lay off ten employees so his payroll is under the $250,000 exemption threshold. This means keeping the business, but on a reduced basis that will reduce his own income. Ten employees would still be out of jobs, putting those families into financial crises and requiring more tax dollars to support them.

3. He can keep his business and pay the tax—which means adding $40,000 a year to his overhead. That $40,000 would do nothing to help his business grow, nothing to create additional jobs, nothing to help the local economy of his community, and nothing directly to help his employees obtain health insurance. The only “benefit” of that expense would be a $40,000 reduction in his own family’s income. For his family to live on 40% less, they would need to sell their home and drastically slash their spending, thereby cutting someone else’s income.

4. A last possibility would be to reduce his employee’s wages to cover the increased cost of providing health insurance.

Each of these options would have a direct negative impact on his small businessescommunity’s economy. That negative impact would be multiplied across the country by the number of small businesses that would be similarly affected. The result would be increasing strain on our nation’s already damaged economy, as well as even less tax revenue to counterbalance our cascading national debt.

This proposal is ill timed and will result in dire consequences to the economy. Our politicians evidently learned nothing from the missteps of Franklin D. Roosevelt, who turned a severe recession into a generational depression by raising taxes in a similar manner. It is frightening to see history being repeated.

Adding even more reason to fear a government health plan was an article in the London Times on Sunday, July 12, titled, “Pay Up If you want To See a GP.” Apparently, the often glorified health care system of the UK is falling apart. Even a national VAT around 15%, income taxes around 40% (on incomes over 35,000UK), and assorted other taxes are not enough to keep up with the spiraling costs of the National Healthcare System. There is no place left to go for funding except the users. The Times says, “If we want to maintain an equitable and high-quality health service, it is time to challenge a long-held political taboo and consider the case for charging patients.”

obama on health careSince other nations’ government health care systems are failing, what makes our politicians think starting one here is the answer to our own health care woes? We need to learn from our own and others’ past mistakes, not simply repeat them.

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6 Responses to Proposed Health Plan a Disaster for Small Business

  1. sara July 20, 2009 at 10:29 pm #

    I recently came across your blog and have been reading along. I thought I would leave my first comment. I don’t know what to say except that I have enjoyed reading. Nice blog. I will keep visiting this blog very often.


  2. Dan Schweihs July 22, 2009 at 5:13 am #

    I will be passing along the cost to employees. I have no choice.
    Most employees already have some form of private insurance and some get healthcare at the VA. Some are on a family policy paid for by the spouse’s employer.
    Employees loose the freedom of choice they have now to self insure or to not have insurance.
    But life will go on. Five years from now, everyone will learn that the key to this is not to get sick. I have heard that Canadians have learned to do everything in their power not to go to the emergency room.

  3. kees verdaasdonk July 26, 2009 at 4:58 am #

    If implementing this system leads to more responsibility from the consumer then that is one plus. However it takes not away the outrageous prices we still pay for healthcare in general. Especially the pharmaceutical industry. Also the FDA does nothing to really protect the citizens against big pharma and also for that matter the food industry. The food industry had lobbied so much that they are allowed by law to slowly poison the population. Key is to increase awareness among the public about the deciet in big pharma, the food industry (meaning the big industries)and the criminal activities in washington itself.

    The problem lies not only in the spendage of the money in “health”care but spending it on a system that cures nothing but is the number one killer in the country. Money again rules and as long as that not changes, no system will make a difference.

  4. Martin Johnson July 29, 2009 at 10:23 am #


    The owner could consider using an employee leasing agency to get the employees off of his payroll altogether. With the buying power of the staffing firm, they usually get relatively low rates for healthcare. He could keep the same workers but they would officially be employed by the leasing/staffing firm.

  5. Jack Mender November 30, 2009 at 10:39 am #

    It seems like business is still getting hit hard. Is anybody seeing an upswing in their respective niches? Health reform seems like a mess. I generate long term care insurance leads and annuity leads for the insurance industry, but volume has been terrible in the last two months. I am afraid the worst is yet to come, but maybe it is just my attitude.

    • Rick Kahler November 30, 2009 at 10:45 am #

      I haven’t seen much of an upturn with my business clients. Most are awating the outcome of the inevitable changes to the tax code, the health care and cap and trade legislation.