Health care reform has become the centerpiece of President Barack Obama’s presidency, which has made it a hot topic across this country. It is also a big issue in HVAC circles as contractors are concerned about the skyrocketing prices of group health care, but also wary of how legislation will affect small businesses in the form of taxes and mandates.
The reform Obama is pushing is housed in multiple committee bills better known as America’s Affordable Health Choices Act of 2009. Introduced in the House on July 14, the aim of the bill is to build on what works in the current health care system while repairing what is broken.
What works and what is broken, however, is debatable and how to fix each health care problem is open to vast interpretation. One thing is for certain, no matter what form of the bill emerges, when it finally passes to law, health care will not be business as usual.
“We offer and pay for our employees’ healthcare, but the cost has escalated these past couple of years to where we must make a conscious decision at budget time,” said Ken Bodwell, president of Innovative Service Solutions. “Reform is definitely needed, and I would support any program that makes sense, but it appears the president is forcing this through the House because there is a majority rule at this time.”
BILL BASICSTwo committees have agreed to one version of the health care reform bill - HR 3200. Currently in committee on the House side of Congress, HR 3200 is sponsored by Rep. John Dingell, D-Mich., and co-sponsored by eight other members of Congress, including Rep. Henry Waxman, D-Calif., the primary sponsor on Obama’s energy bill.
The intent of the health care reform bill is to make health insurance affordable to every individual and to every business owner - no matter the size. It includes a set of consumer protections for the insured and places limits on insurance companies. It also provides a public option of health insurance, which was described as an insurance company run as a nonprofit organization to directly compete with the current insurance agencies run for profit. The theory stands that less overhead and profit ambitions offers Americans the same coverage at a lower price.
“The plan is not to reduce coverage or ration care, but to eliminate practices that aren’t making people healthier,” said Obama.
A vote in the House has not been scheduled yet, and after passing the House, it must also pass the Senate before it can be signed into law.
SMALL BUSINESS PLANSOne of the main goals of health care reform is to reduce the long-term growth of health care costs for businesses - small businesses especially. According to a study quoted in the government’s report, “Helping the Bottom Line: Health Reform and Small Business,” from 2000-2007, the proportion of non-elderly Americans covered by employer-based health insurance fell from 66 percent to 61 percent.
The percentage of small businesses offering coverage dropped from 68 to 59 percent while larger companies remained at 99 percent. The report also cited the March 2008 population survey, which revealed that approximately 33 percent of those uninsured were small business workers.
“Because they lack the bargaining power that large businesses have and face higher administrative costs per person, small businesses pay up to 18 percent more for the very same health insurance plans - costs that eat into their profits and get passed on to their employees,” explained Obama in his weekly address released on July 25.
In its current state, proponents of the legislation believe the health care reform bill provides a two-fold approach to reducing small business cost for providing quality coverage. The first provision is a new Health Care Exchange. Overseen by the Health Choices Administration and the Health Choices Commissioner, both of which are established in HR 3200, the Health Care Exchange is to “facilitate access of individuals and employers, through a transparent process, to a variety of choices of affordable, quality health insurance coverage, including a public health insurance option.”
In essence it is a marketplace of insurance coverage options that allows qualifying individuals and small businesses the ability to purchase health care coverage at lower costs. To help offset the cost, a second provision was written into the bill - tax credits and subsidies. The Congressional Budget Office estimated that small businesses would receive approximately $53 billion in tax credits between 2010 and 2019. According to the Executive Office of The President Council of Economic Advisers report, “The Economic Effects of Health Care Reform on Small Business and Their Employees,” released July 25, these small business tax credits would “help alleviate the disproportionately higher costs and encourage coverage.”
COUNT THE COSTDespite the positives being highlighted and touted from podiums and multiple town meetings by supporters, voices on the other side of the issue believe sweeping reform and large government programs always come at a price. The HVACR industry associations and contractors are looking at these costs closely.
“All five versions start with the assumption that employers must provide qualified health care coverage for its employees and that all individuals must obtain qualified health care coverage from their employer, a private carrier, or from the national exchange,” explained Charlie McCrudden, vice president of government relations for the Air Conditioning Contractors of America (ACCA). “An employer that fails to provide or an individual who fails to obtain qualified health care coverage would be penalized.”
According to the tax section of HR 3200, employers with a payroll of less than $250,000 would not pay any penalty. The percentages increase from there: $250,000-$300,000 pays 2 percent; $300,000 to $350,000 pays 4 percent; and $350,000 to $400,000 pays 6 percent. All other businesses with payrolls above $400,000 are penalized 8 percent.
Raising revenue - which can also be read as taxes - to cover the new program and the uninsured is still being addressed in committees as well.
“As a revenue raiser to offset the costs of the plan, the House bill creates new taxes on individuals with incomes that exceed $280,000,” noted McCrudden. “Many small businesses are set up as sole proprietorships, S corps, and partners, which elect to report income and losses through personal income tax returns. The House proposal would unfairly target these small businesses with new taxes. The Senate proposal to raise revenue has yet to be released.”
According to McCrudden, ACCA sees this bill as “adding undue burdens to small businesses through increased taxes and mandates. ACCA member companies are very concerned about the costs of the overall proposal and its proposed changes to our health care delivery system.”
ACCA surveyed its members on health care twice in the last six months. In February, ACCA supported health care reform as they knew it at the time. “What has evolved we can no longer support,” said McCrudden. “We will continue to press for reform that will lower costs and keep the burdens off small business.”
The Sheet Metal and Air Conditioning Contractors’ National Association (SMACNA) is interested to see what will shake out as it watches the legislative process closely. The association supports legislative initiatives and tax policies that encourages groups and individuals to obtain health care coverage and promotes access, portability, and security of health benefits. SMACNA, however, has concerns as uninsured workers and their uncompensated health care costs result in higher premiums for employers providing health care benefits.
Because of this, the association opposes any health care initiatives that require employers already providing health care benefits for employees to subsidize employers who do not, or that adversely interfere with Employee Retirement Income Security Act (ERISA) protected collective bargaining plans.
“If Congress ultimately includes some type of employer mandate to provide health care, SMACNA opposes any small business exemptions,” said Dana Thompson, assistant director of legislative affairs, SMACNA. “Fifty percent of SMACNA employers have 10 employees or less and 80 percent have 16 employees or less, and all SMACNA employers provide insurance for their craft workers. No small business would be at a competitive disadvantage if all employers were required to provide health care.”
According to Thompson, an employer mandate would expand coverage and create the widest possible coverage at the least amount of cost to the government. This, in turn, would reduce the cost of care for state and local governments down the road. The association is also concerned about the misclassification of employees as independent contractors.
“If Congress does mandate coverage for all employees without exemptions, there would be more incentive for employers to willfully misclassify employees as independent contractors,” explained Thompson. “Abuse of independent contractors is a widely acknowledged problem in the construction industry and hurts responsible employers and hurts federal, state, and local governments, which lose tax revenue.”
PANEL DISCUSSIONWith so many questions, rumors, and speculations circling the formulation of the health care reform bill,The NEWSdecided to ask its contractor panel for some insight as to how the eventual passage of the bill could possibly affect their businesses. One question being asked: If the bill is passed and a government option is offered, will you continue to offer health care to your employees?”
Each of the responding panelists agreed that they would initially continue to offer health care to their employees, not relying on the public option, but cost concerns raised questions as to how long they would continue to provide private employer-sponsored insurance.
Russ Donnici, president of Mechanical Air Service Inc., San Jose, Calif., echoed many of the panelists responses when he said, “We would offer private insurance until it gets so cost prohibitive that we can’t afford it and I think that would happen quickly.”
As health care reform - and all the issues that come along with it - are discussed around water coolers and dinner tables, the HVACR industry is waiting to see what the final bill will look like. The final product will have an effect on the industry, but what that effect will be is yet to be seen.
“I’ve been in this industry and business for 40 years,” said Bodwell. “There are good administrations and bad. There are good pieces of legislation and bad. The industry will survive and those businesses that have depth and flexibility will adjust and continue to be profitable.”