What Are They Smoking in Obamington?

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Mr. Fixit's latest pitch for bigger health insurance relies on false assumptions.

A new study by the White House Council of Economic Advisers said small businesses pay up to 18 percent more to provide health insurance for their employees.

This begs the question, 18% more than what?

Small companies pay proportionately more than big ones because they lack bargaining power and face higher administrative costs, the study found. It said that effectively levied a "heavy tax" on small businesses and their employees.

Small companies may pay more as a percent of total revenues in much the same way as a $20,000 wage earner uses more (expressed as a percent of income) to pay for food than does a $200,000 wage earner.

Small businesses have no less bargaining power than a big business and the marginal cost of administering a small group plan vs a large group plan is minimal. A business with 5 employees enjoys the same discounts on medical services via the PPO network as a larger business.

The "heavy tax" a small business pays is nothing compared to what they will pay when Washington reforms health care and gives us bigger health insurance.

A proposal in the House calls for employers with a total payroll above $250,000 to offer health insurance to their workers or face a surtax of as much as 8 percent. A Senate committee version would require all businesses, except those with fewer than 25 employees, to provide health coverage or pay a $750 fine per year for each worker.

Right now the "heavy tax" is voluntary. Either the employer CHOOSES to offer health insurance or not.

With Obamacare that is no longer an option.

All businesses will pay in one way or another and that additional cost will be passed on as a hidden tax in the form of higher prices paid by their customers.

Among the provisions in draft legislation viewed favorably by the administration are: an "insurance exchange" allowing small businesses that meet certain criteria to be able to purchase health insurance from a multitude of plans; and tax credits to help small businesses pay for the coverage.

The idea of an insurance exchange lowering costs is pure BS. Policies offered by the exchange, at least as proposed in the House bills, are considerably more expensive than policies offered in today's open market.

Exchange policies will have mandatory guaranteed issue, community rating, coverage for children from birth to age 21 (including immunizations and hearing), mental health parity, maternity and will provide payment to mid-wives at the same reimbursement level as an OB. Will someone explain how all of these NEW benefits can be provided at a lower cost than policies that do not currently include these provisions?

Further, the idea that the exchange will have lower admin costs and save the small employer from the 18% "heavy tax" is pure fantasy.

I have a great deal of experience in developing and managing association health plans and PEO's. While it is true some economies will result from administering a handful of plans (usually 3 or less) over a large number of covered participants there is no real savings on the whole.

If rates in the exchange are lower than for similar coverage outside the exchange, and if a truly free market exists, groups will gravitate to the lower priced exchange. But not all small employers will realize a savings by moving to an exchange policy.

Some will want benefits that are not as rich as the exchange policy and will opt out. Others may move into the exchange but as soon as they can find a lower priced policy outside the exchange they will leave.

This assumes they have the freedom to move and freedom to select their own benefits.

Of course the House version of health care reform eliminates these possibilities.

Christina Romer, head of the Council of Economic Advisers, said such provisions would enable small businesses to be "more able to compete with the big boys" in selling their goods and services and "able to compete fairly on a level playing field with big businesses to attract the best workers,"

"The vast majority of small businesses, they'll see their burdens absolutely lessened by the expansion of coverage," Romer said in a conference call with reporters. "So they are absolutely going to be more competitive."

What is Christina Romer smoking? Nothing could be further from the truth.

If this Obamanation of a health care plan passes the economy will worsen and more people will find themselves out of work, and unable to afford health insurance than ever.

Smaller cars, bigger health insurance, Poppa Washington.