Wednesday, March 31, 2010

Effects of Health Care Law Worry Small Businesses But Pharmaceuticals See a Boom

Small businesses are concerned about the effects of the health care law, but pharmaceutical companies are expecting a huge booom to thier bottom line. The U.S. drug industry fended off price curbs and other hefty restrictions in the health care law even as it prepares for plenty of new business when an estimated 32 million uninsured Americans gain health coverage.

Steve LeBlanc of The Associated Press today examines the concerns that small businesses have over the new health-care law in his article today:

The national law doesn't require businesses offer insurance but hits employers with 50 or more workers with an annual $2,000-per-employee fee if the company doesn't insure them and the government ends up subsidizing their workers' coverage.

The national law also grants tax credits for businesses with 25 or fewer workers with average annual wages below $50,000, which Democrats say that will benefit 3.6 million business nationwide. And beginning in 2014, businesses with up to 100 employees will be able to pool their employees in state-created insurance exchanges to increase their negotiating clout with insurance companies - a move supporters say could aid 29 million businesses.

... Such penalties make Doug Newman, owner of Newman Concrete Services in Richmond, Maine, nervous. In the past 18 months, as the economy battered the construction industry, Newman's work force shrunk from 125 employees to just 25.

He is worried that once the economy turns and he begins to hire back workers, he'll face a critical decision when he nears the 50-worker mark and is no longer exempt from penalties. Newman now pays 60 percent of his employees' individual premiums and 40 percent of their family premiums.

"The 51st employee could mean $100,000 in costs. I've been calling it the concrete ceiling," he said. "No employer is going to hire No. 51 if it brings all these mandates down on you, because they're pretty onerous."

Don Day is also worried. Day owns eight small businesses in McKinney, Texas, including two restaurants, a boutique hotel and several retail shops.

Although he employs 125 workers, he offers health care for just a few key employees. Just an extra $200 a month per employee for health care could set him back hundreds of thousands of dollars a year - a cost he can't afford.

"It's not just me, it's every small business across this land," he said. "A lot of small businesses are going to go out of business."

It would seem like an easy decision for any small business in 2014. Drop health care as a benefit and pay the fine. With health-care premiums well above $7,000 a year for businesses, you would be saving $5,000 a year.

This may be good for the individual business, but bad for the taxpayers, as each taxpayer would have to pick up the tab to subsidize those going into the exchanges.

The story also talks about employers welcoming the new law:

Rand's Do It Best Hardware store on Main Street in Plymouth, N.H., has been in owner Steve Rand's family for more than a century. About a decade ago the company switched from providing a full health care plan to having employees share in the cost of rising premiums.

Since then, those costs have spiraled out of control and Rand hopes the new law lets him pool his workers in state-run exchanges to increase his purchasing power.

"This legislation is really a positive step in the right direction, allowing us to get back in the business of making our company able to offer a health plan," Rand said.

Michael Widmer, president of the business-backed Massachusetts Taxpayers Foundation - which supported the state law - said the requirement for near-universal coverage has been a much bigger issue for local businesses than the fines for not offering insurance.

That provision, known as the individual mandate, is costing local businesses between $500 million and $750 million extra annually, he said.

"There is no doubt that with the individual mandate there will be more employers picking up the tab," he said.

Large pharmaceuticals are also big winners in the new law.

The U.S. drug industry fended off price curbs and other hefty restrictions in the health care law even as it prepares for plenty of new business when an estimated 32 million uninsured Americans gain health coverage.

Lobbyists beat back proposals to allow importation of low-cost medicines and to have Medicare negotiate drug prices with companies. They also defeated efforts to require more industry rebates for the 9 million beneficiaries of both Medicare and Medicaid, and to bar brand-name drug makers' payments to generic companies to delay the marketing of competitor products.

The impressive list of wins is testament to a carefully planned and well-financed lobbying strategy, led by Pharmaceutical Research and Manufacturers of America, the industry's deep-pocketed trade group. The trade group has been led by former Louisiana U.S. Rep. Billy Tauzin, a Democrat, whose $4.5 million in earnings in 2008, the most recent figure available, underscore the high stakes for the industry.

Costly brand-name biotech drugs won 12 years of protection against cheaper generic competitors, a boon for products that comprise 15 percent of pharmaceutical sales. The industry will have to provide 50 percent discounts beginning next year to Medicare beneficiaries in the "doughnut hole" gap in pharmaceutical coverage, but those price cuts plus gradually rising federal subsidies will mean more elderly people will purchase more drugs.

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