The Small Biz Buzz

The Bureau of Labor Statistics' New Data

The Bureau of Labor Statistics released its quarterly findings today in yet another study about the economy. The study seems to refute anybody who claims that small businesses are not important to the economy and gives more fuel to small-business advocates (such as NSBA) who continue their fight to show the Bush Administration why it should pay more attention to small businesses.

Two excerpts:

* "For example, the data show that, from September 1992 through March 2005, firms with fewer than 500 employees accounted, on average, for 65 percent of quarterly net employment growth, representing 13.5 million out of 20.6 million net jobs created by the total private sector."

* "All firm-size classes experienced at least one quarter of negative net employment change related to the 2001 recession, but the larger size classes experienced more quarters of net loss than the smaller classes."

Proposal to Cap Health Insurance Tax Deductions

President Bush's Federal Tax Commission yesterday unveiled their recommendations that include an $11,000 cap on employer-sponsored health insurnace tax incentives.

Currently, there is no limit on the amount of tax deduction a buisness can take on health-insurance for their employees. According to the OMB, that amounted to $112 billion in lost-revenue for the federal government in 2005 alone.

Fair Tax Gets the Ax

The President’s Panel on Tax Reform killed the Fair Tax at their Oct. 11 meeting. The meeting—-the last before they deliver their findings on Oct. 18-—was presented in a roundtable-type discussion forum. After mulling proposed changes to deductions for employer-sponsored health care and mortgage interest deductions, the panel turned on the Fair Tax.

Ed Lazear, the panel member heading the Fair Tax study group, started off well by listing the positive aspects of a consumption tax: encouraging savings, simplified administration, reduced tax burden, etc. Lazear also presented Treasury estimates of what the consumption tax rate would have to be to replace the government’s current income, a range of 22-26 percent.

Then he woke-up the dozing crowd. According to another set of numbers Treasury had run--figuring that Congress would eventually exempt huge swaths of the economy from taxation—-Lazear announced that the final rate would end up somewhere between 64 and 87 percent. Yes, 87 percent!

Expect to read that in the papers from this point forward.

After the bomb, panel Chairman Connie Mack (R-Fla.) went through the motions of inquiring about Fair Tax administration, but it was clear the game was over.

The President’s Panel on Tax Reform will not recommend a National Retail Sales Tax to replace the current code. While positive changes to the code may still come from the panel, an opportunity for fundamental reform has been squandered.

The Future of Social Security Reform

In a wide-ranging policy address, President George W. Bush had the following to say about Social Security reform:

"As you know, I’ve advocated the need for people to come together to address the Social Security issue. It’s an issue that’s not going to go away. And I’ll continue to talk about it. There seems to be a diminished appetite in the short-term, but I’m going to remind people that there is a long-term issue that we must solve, not only for the sake of the budget, but, more importantly, for the sake of younger workers who are going to either have to pay a ton of money in order to justify current benefits, or to take a look at the underlying causes of the growth of benefits and do something about it, show some political courage."

Some reporters wasted no time interpreting this as a Bush retreat from reform. Nothing could be further from the truth.

What is true is that Grow Accounts are increasingly being seen as the only way to achieve some form of Social Security reform.

Grow Accounts do not fix Social Security as they don't address solvency. But they may be necessary as a first step down the road to reform.

Improvements for Health Care Quality

The National Committee for Quality Assurance (NCQA), in conjunction with the U.S. News and World Report released a report announcing improved performance of HMOs. According to The State of Health Care Quality 2005, as many as 67,000 deaths have been prevented over the past six years due to increased reporting and quality standards. Unfortunately, voluntary reporting nets only 21.5 percent of the industry publicly reporting on performance.

Employer Mandates for Health Insurance?

The Suffolk County (N.Y.) legislature has approved a bill that would mandate large employers to contribute funds to employee health insurance. The legislation calls for $3 per employee per hour to be contributed to a fund that will go toward health insurance.

Though not the first of its kind, this bill would be the first to be enacted if the county executive approves it rather than issuing a veto, which was the case with a similar bill in Maryland.

Small Business Pension Adoption Down

A report released by the Congressional Research Service finds that employer-provided pension plans are declining in popularity. According to the report, both the number of employers offering plans and employees participating in plans shrank in 2004.

]]> Small businesses, not surprisingly, were less likely to offer plans to year-round, full-time employees than larger businesses. According to the report, only 26.5 percent of workers at firms with less than 25 employees participated in employer-sponsored plans verses 48.6 percent at employers with 25-99 employees and 67 percent at employers with 100 or more employees.

From a demographic point of view, the report found that men and women participated in roughly equal measure with women edging out men 54.1 percent to 52.9 percent. White workers also were more likely (59 percent) than black (49.7 percent), Hispanic (31 percent) or other non-white (50.8 percent) workers to participate when plans were offered.

To encourage plan adoption and sponsorship, NSBA advocates for streamlining the formation and administration of qualified benefit plans. Watch the work of the House Ways and Means committee this fall as Chairman Bill Thomas (R-Calif.) works on his pension reform bill.

Sept. 11 Disaster Loans Misused

In a story reported by the Associated Press, the disaster loans established to help businesses harmed by the Sept. 11 terrorist attacks always were not used for that purpose. In Colorado alone, 411 loans were issued under the Supplemental Terrorist Activity Relief (STAR) loan program administered by U. S. Small Business Administration. Some of the businesses who received the STAR loans include a liquor store, a tire-store chain and a nail salon.

In a terse press release, Senate Small Business Committee Chair Olympia Snowe (R-Maine) stated, "The apparent widespread abuse of loans provided through the Supplemental Terrorist Activity Relief Act is nothing short of an outrage."

Katrina - The Aftermath

The absolute disaster that is Katrina will affect the activities of Congress for months to come. Adding the hurricane’s effects to an already overcrowded fall schedule will increase the difficulty for legislative successes.

Estate tax repeal, long scheduled for a vote on the Senate’s first day back at work, has been postponed indefinitely; it may be the first of many changes in the coming months.

Calls for aid packages, investigative hearings and possibly a new energy bill will compete with two Supreme Court nominations, appropriations season and the reconciliation process. And let’s not forget about the ongoing Social Security debate or the President’s Panel on Tax Reform slated to drop its recommendations at the end of September.

The coming months will certainly test the elasticity of the projected legislative calendar.

Health Insurer Will Publish Costs of Procedures

Aetna Health Insurance kicks off a pilot program today in Ohio where they will make public their negotiatied prices with area doctors for meical services. The project has been widely praised as a move toward increased patient involvement in a market severely lacking consumerism. Aetna's president Ronald Williams stated that the project will encourage both higher quality and lower costs.

Hmm... Giving people information to make good decisions. Who knew??

Rewarding Bad Medical Care

This weekend, the Washington Post started a series looking at the many flaws of the Medicare system. As the article clearly demonstrates, hospitals and health care providers often make more money when they provide worse care. These perverse incentives are not limited to government programs. Fundamentally changing the way that providers are paid for care is a critical component of making insurance more affordable for small businesses.

Consumer-driven Health Care Gains Popularity

According to America's Health Insurance Plans (AHIP), Health Savings Accounts (HSAs) are seeing sharp increases in enrollment. As of May this year, more than one million people nationwide have enrolled in HSAs, twice the enrollment numbers from September 2004.

HSAs Continue to Grow

The New York Times published an informative story this Saturday about Health Savings Accounts (HSAs), featuring NSBA Board Member Scott Hauge.

Hauge's company, Cal Insurance and Associates, recent began offering HSAs to its employees and it has done very well.

NSBA supports HSAs and applauds the Times for publishing an insightful piece.

Hospital Infections Tallied $2 Billion in Pennsylvania Last Year

A new report from the Pennsylvania Health Care Cost Containment Council quantifies the painfully obvious -- medical mistakes cost a LOT of money. Pennsylvania began a pilot program last year to evaluate the cost of hospital-acquired infections, as well as the outcome of establishing quality and reporting protocols.

What did they learn? Nearly 12,000 Pennsylvanians contracted infections during a hospital stay in 2004, costing an extra $2 billion in care and at least 1,500 preventable deaths.

States Seek Increased Payroll Taxes for Universal Health Care

Currently, 18 states are considering bills that would create a single-payer health care system. The majority of these bills propose to create a state government-run insurance plan funded by payroll taxes and new taxes on income.

Though people's satisfaction with their insurance is decreasing, a Kaiser Foundation poll earlier this year showed that 55 percent of Americans opposed a single-payer health system.