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Small business Profile

Tax credits help Nevada business man keep healthcare for employees

Ron Nelsen

Ron Nelsen
Pioneer Overhead Door
Las Vegas, NV

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Economic Research

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Executive summary: NATIONAL STUDY Executive summary:
Full report: NATIONAL STUDY Full report:
Press release: NATIONAL STUDY Press release:

Executive summary


More than any other sector of the economy, small business suffers from our broken healthcare system. From spiraling premium costs to inadequate access to quality healthcare for themselves and their employees, small business owners have seen their prospects for growth diminished and their profits slashed by today's patchwork of inefficient healthcare options.

As the nation now debates comprehensive healthcare reform, America's entrepreneurs understand the need to focus on practical and effective solutions. For most of them, the tired political demagoguery of past healthcare debates cannot be allowed to trump the need for wholesale change. The cost of doing nothing is simply too high.

Against this backdrop of a failing system and the prospect of true reform, Small Business Majority commissioned noted economist and Massachusetts Institute of Technology professor Jonathan Gruber to apply his trusted healthcare economics microsimulation model to the small business sector-specifically those businesses with 100 or fewer employees. Using his model, Dr. Gruber analyzed the continued impact of no reform on small business costs, jobs, wages and profits over the next ten years and contrasted that with three different reform scenarios, all based on the shared responsibility model proposed by President Obama and now being debated on Capitol Hill.

This study represents the first ever application of the Gruber Microsimulation Model (GMSIM) to a broad range of small business success benchmarks under health reform. The results are clear: Small businesses will be far better off under a thoughtfully reformed healthcare system based on shared responsibility among individuals, business, government and the healthcare industry-as long as such a system includes provisions that reflect the particular financial constraints faced by small businesses. Under the models considered, shared responsibility includes tax credits to enable small business owners to better afford coverage options (based on the size of the business), coupled with a payment, on a sliding scale, to be made by employers who don't offer health insurance (also based on the size of the business).

The analysis demonstrates that the type of healthcare reform that is emerging from today's debate will save small businesses hundreds of billions of dollars in costs, protect small business wages and jobs-and allow small business owners to continue to reinvest in and grow our economy.


The Cost of Health Benefits to Small Business Per Year: No Reform


Key findings

The study compares three healthcare reform scenarios with each other and contrasts them with a continuation of the existing system. The reform options analyzed all include a financing system of shared responsibility. Three scenarios were considered, with a sliding scale of tax credits to be provided to employers who offer insurance, and a sliding scale of payments from employers who don't. The three scenarios can be characterized as providing limited support for small employers, expanded support for small employers, or significant support that would protect small business owners (see pages 5-6 of the PDF).

For each of the scenarios, the effects on four benchmarks of small business success are examined: (1) costs, (2) jobs, (3) wages and (4) profits, while also analyzing the effect on "job lock" (the concept that workers stay in jobs longer than they would like because they can't replicate the benefits the jobs provide). The report shows that, in just about every case, reform would likely reduce costs, save jobs, preserve wages, bolster profits and virtually eliminate "job lock" when compared to doing nothing.

Specifically, the study shows that over the next ten years the three reform scenarios considered would:



Small businesses in the United States are suffering great harm under our current healthcare system and will likely fare far better under a substantially reformed system along the lines of what is currently being debated in Washington-as long as such a system offers appropriate levels of assistance to small businesses in meeting their healthcare obligations.