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Report Says Health Care Reform Can Cut Small Business Costs, Save Jobs

A study recently conducted for the Small Business Majority by economist and Massachusetts Institute of Technology professor Jonathan Gruber has found that health care reform would offer a significant economic benefit to small businesses. The study entitled “The Economic Impact of Healthcare Reform on Small Business”, projects that reform will save hundreds of billions of dollars in costs, and protect small business wages and jobs.

The report states that small businesses “face a disadvantage in the health insurance market, which means they often pay more, and get less. A survey of small businesses showed that the fewer employees a small business has, the higher its premium rates….Overall, small businesses and their employees pay an average of 18 percent more for the same level of health insurance benefits as large businesses.”

The study compares the current system with three reform models based on elements of existing health care reform proposals. The models include shared responsibility for small businesses, notably that employers that do not offer insurance would be required to contribute to their workers health coverage, although the contribution would be on a sliding scale based on the number of employees and the size of payroll. The models also include targeted tax credits to support small businesses that do offer health care coverage, with credits reflecting what firms are actually spending on health coverage for employees.

Without reform, small businesses will lose $52.1 billion in profits to high health care costs over the next 10 years, the study found. Health care reform can reduce these losses by more than half, saving $29.2 billion in small business profits.

Projections from the study show that reform would reduce small business health care costs, save small business jobs, maintain small business employee wages, increase small business profits and competitiveness, and decrease “job lock”.

The report concludes that the system most likely to benefit small business would include employer contribution obligations and tax credits based on annual payroll and number of employees.

Access more information and the full study here.