Thursday, February 28, 2008

Health Care Reform's Impact on Business

I think that the health care system will be fixed gradually with the next administration. Perhaps the new president will kick-start health care reform with an action designed to build goodwill toward the process, such as an announcement of federally-subsidized catastrophic coverage or medical debt forgiveness for a small segment of Americans, and build out slowly from that.

If employers no longer need to purchase private health insurance for employees, they might need to pay into a local, state, or national health care plan fund. If the plan (either government-based or private) is structured and administered well, with a reasonable level of services for patients and reasonable reimbursement rates for providers, it can provide better care at a lower cost than the patchwork of plans currently available. The debate about the cost of such a plan is raging in San Francisco now, though, with the city mandating employers to pay into a fund that would cover uninsured adults. The Golden Gate Restaurant Association fought the plan, claiming the mandated costs are higher than restaurant owners can afford.

If employer-provided health care is decreased or goes away completely, I think that there will be some unintended consequences for large companies in particular. Many people hold on to jobs they don't like at larger employers solely for the access they provide to quality health insurance. If other affordable, high-quality options become available, I think that these employees will leave their employers. Some will move to work in different fields, but others will move to competing companies, or start their own businesses to compete with their former employer.

According to the White House, small businesses are the engine of job creation in this economy, providing two out of every three new jobs, although the nonpartisan National Bureau of Economic Research questions these rosy statistics. Small businesses freed from the burden of taking on large health care costs once they reach a certain size, however, are likely to grow rapidly. As some larger businesses lose employees and smaller businesses gain them, will the revenue gap between the two types of businesses decrease? Will that change ultimately decrease the gap between rich and poor, and shore up the middle class again?

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