Much has been said lately by Elizabeth Edwards and others about individuals who would be in trouble under the McCain health care plan. But they aren’t the only ones. McCain’s plan could very well leave the engine of America’s economy out in the cold as well — small businesses.
Small businesses face significant barriers in getting and keeping health insurance. Recent survey data from the National Federal of Independent Business bear this out, with 81 percent of small business owners indicating that “finding affordable healthcare” is a challenge, with 16 percent calling it was their biggest challenge.
The reason is that small businesses do not have enough people to create a “stable risk pool.” That’s insurance gibberish for simply saying that, if just one employee develops a catastrophic disease or has a major accident, then the insurance company loses money on that small business. In the insurance marketplace, small businesses don’t have it much easier than individuals.
To help small businesses, the majority of states take steps to cap premium rates within a certain range (technically called a “rate band”), and many states will also cap the annual increase in premiums. As research from Georgetown University shows, some states have strong protections, like California. Other states do not, like Kentucky and Louisiana where insurers are allowed to increase rates by more than 20% in a single year for a small business (most states only permit increases smaller than that). Very few states offer no rate protections: District of Columbia, Hawaii, Pennsylvania, and Virginia.
The McCain plan could very well create a rush to the bottom among insurers in these rules. McCain’s idea to allow insurance companies to sell policies over state lines will weaken small business protections by enabling businesses to simply market insurance policies around the country from states with weak protections. There would be no reason for an insurance company to sell a policy anywhere other than from states with weak insurance rules. And as I’ve blogged previously, McCain seems ok with being willing to ignore consumer protections by saying, “That would be mandating what the free enterprise system does.”
Does this mean small business costs will go up? Not necessarily. Small businesses could choose to slash benefits to contain costs, reducing coverage for owners and employees alike. But one reason these state rules exist is to prevent wild swings in price. McCain will offer much less predictability for small businesses on insurance costs, which will weaken small businesses.
The NFIB has also found that 69 percent of small business owners believe that “healthcare should be a top priority for the next president.” Under a McCain presidency, those small business owners would be better off if McCain just forgot about working on health care.