Affects Of Health Reform Bill On Businesses?
MAUREEN CAVANAUGH (Host): I'm Maureen Cavanaugh, and you're listening to These Days on KPBS. If you rely on statements by the U.S. Chamber of Commerce, you'd quickly come to the conclusion that America's business owners hate the new healthcare law. The Chamber says the new law fails to fix what is broken, and risks breaking what already works. In reality, the reaction of the nation's businesses to the new healthcare legislation is a lot more varied. The rising cost of health insurance has been a huge problem for American businesses. Now, some owners are actually celebrating provisions that may lower their costs and allow them to once again offer healthcare benefits to their employees. But it’s probably fair to say, that most employers are still trying to figure out what the provisions in the new healthcare law will mean to their businesses and to their bottom lines. We have several guests joining us today to examine how the new healthcare rules and regulations will affect businesses in San Diego. First guest up, and thank you so much for being here, Ruben Barrales is president and CEO of the San Diego Regional Chamber of Commerce. Ruben, welcome to These Days.
RUBEN BARRALES (President/CEO, San Diego Regional Chamber of Commerce): Thank you, Maureen. Nice to be on with you.
CAVANAUGH: Now how will businesses, as far as you know, at this point, both large and small, be affected by the new healthcare law that was signed by the president?
BARRALES: Great. Well, thanks for asking. I think you have to distinguish between sizes of businesses.
BARRALES: Really, the threshold, the major threshold that we’ve seen is with businesses over 50 employees and those with under 50 employees. They’ll be treated differently. Basically, businesses with under 50 employees will not have some of the requirements that larger businesses will have on them. So if you’re a business with 50 or more employees, then there will be some very direct regulation s and fees that will be paid by the employers. Smaller businesses, hopefully, will have some tax credits available to them that might create an incentive to provide healthcare for their employees but we’ve yet to see how those credits might play out.
CAVANAUGH: Now, Ruben, it’s my understanding that upwards of 90% or more of businesses in San Diego are actually – have fewer than 50 employees. Is that correct?
BARRALES: That’s right, so just on the face of that a majority of the businesses won’t be directly impacted by the mandates of the healthcare reform bill that just passed. Although, I think it’s fair to say that most all the small business owners will be impacted with the increased Medicare taxes and some of the other costs of the bill.
CAVANAUGH: Now how big of a concern has the cost of healthcare become for businesses in recent years, Ruben?
BARRALES: Oh, incredible, Maureen. As you mentioned, the cost of healthcare is – makes it very, very difficult for many small businesses to provide that kind of healthcare to their employees. You often hear the case where a small business owner would like to provide healthcare to their employees but they literally can’t afford to because their business is on such a thin margin. So the increasing cost of healthcare, I think, has got most everybody agreeing that, you know, we need to reform a healthcare system. But I think it’s fair to say that the jury’s still out in terms of whether or not this particular piece of legislation actually will help make it more affordable. It will with the tax credits for some businesses in the short term and it might with some with the pooling of small businesses but, you know, it’s very complicated and, hopefully, what it won’t do is drive up the cost of healthcare any more than it’s been driven up in the last few years.
CAVANAUGH: Now it sounds as if you’re very wary about some of the elements in this legislation. What are you most concerned about?
BARRALES: Well, one of the issues that has come up has been that 50 employee threshold. So you might have at the margins a situation where some employers, you know, will really question, you know, expanding their workforce if they’re near that 50 employee mark full time or part time. But I think fundamentally the question will be will the cost to businesses prohibit them from hiring more people, whether it be full time or part time as well.
CAVANAUGH: Now as president and CEO of the San Diego Regional Chamber of Commerce, you know very well how really rigorously opposed the U.S. Chamber of Commerce is, has been, to this legislation. Where do you stand? Do you stand arm in arm with them on this? Or are you a little bit more sympathetic to the aims of this new law?
BARRALES: Well, we definitely believe that healthcare needs to be reformed. And as you mentioned 90% of the businesses in San Diego are small businesses so many of them won’t be directly impacted by the 50-plus mandate as we refer to it, requiring health insurance for their employees. So the rub is for the small businesses in San Diego, the question might be, you know, will there be enough incentive to actually change the equation for their employees. In other words, will the incentives that are put in place actually allow small businesses to provide these healthcare benefits if they’re not providing them now? It won’t be mandated to so will a 35% tax credit provide enough of an incentive? And I think, you know, the jury’s still out. It might for some with a high enough margin or profit margin, others that are still a very – low profit margin, I don’t think the tax credit’s going to make the difference for them to provide healthcare. So then the bigger question is, you know, at this huge expense for this bill, will it in the end provide more people who are working in small businesses affordable coverage?
CAVANAUGH: Now to be clear, that tax credit does go up to 50%, doesn’t it, in the next year or so?
BARRALES: Yeah, I believe it does. I think there’s a different range for the tax credit for smaller businesses.
CAVANAUGH: And the mandate for businesses of over 50 employees, that doesn’t kick in until 2014, is that right?
BARRALES: That’s my understanding, 2014 is a major date for much of the implementation of the healthcare reform, that’s right.
CAVANAUGH: So how would you like to see this legislation perhaps clarified that would make you more comfortable with it and you think it would serve businesses a little bit better?
BARRALES: Well, I think what would help is as quickly as possible if we could fill in the details of what’s required and what those incentives are. Also, these state-run pools for small businesses, those will be established I believe in 2014 as well. Those could provide an opportunity for small businesses to save on premiums for their employees. But, again, that’s yet to be determined. I believe, in material that I’ve seen, the Congressional Budget Office basically says that, you know, for small businesses, they most likely will see little or no decrease in their monthly premiums. Hopefully, you know, we won’t see an increase and, hopefully, we’ll see more than a small decrease in monthly premiums.
CAVANAUGH: Before I let you go, Ruben, I’m interested, what kind of calls from businesses have you been getting in the past day or so?
BARRALES: You know, it’s been mixed, Maureen. As you’ve mentioned, the business community in San Diego is very diverse, so everything from folks that are absolutely opposed to the overall bill for a number of reasons, because it’ll cost them more or they’re concerned about the issue – the deficit, the federal deficit in the new entitlement program, to others who think that that actually provides an opportunity for them to provide healthcare. They agree with the goal of covering the uninsured in general, and some optimism. So I think there’s a wide range and like, you know, with most large pieces of legislation, I think we have to see, in the end, you know, are there unintended consequences and are the benefits actually going to prove out over the many years that this law becomes implemented.
CAVANAUGH: Ruben, thanks so much for joining us this morning.
BARRALES: Thanks, Maureen.
CAVANAUGH: I’ve been speaking with Ruben Barrales. He’s president and CEO of the San Diego Regional Chamber of Commerce. I’d like to welcome two new guests to our conversation. Richard Ledford is owner of Ledford Enterprises. Richard is also a member of the local chamber of commerce, and has worked in public service and advocacy for more than 30 years. Richard, welcome.
RICHARD LEDFORD (Small Business Owner): Thank you, Maureen. Good morning.
CAVANAUGH: And Ruben Garcia is district director of the U.S. Small Business Administration in San Diego and Imperial Counties. Good morning, Ruben.
RUBEN GARCIA (District Director, U.S. Small Business Administration, San Diego and Imperial Counties): Good morning, Maureen.
CAVANAUGH: You know, we’d like to invite our listeners to join the conversation. If you are a business owner with a question about the new healthcare law, give us a call, 1-888-895-5727. Ruben Garcia, I’d like to get your overall take on the healthcare reform bill. How do you think it will affect the small businesses in San Diego?
GARCIA: Well, Maureen, Congress has passed a comprehensive healthcare reform bill that’s going to be a very important tool to helping small businesses grow and to compete. And the bill helps small businesses in two critical ways. It provides better access to options and, number two, it reduces the overall cost. And, believe it or not, there’s about 13.2 million small businesses that will be affected by this, and that’s really where it lies, in the businesses that are between 3 and 9 employees. Although there are provisions…
GARCIA: …for those that are 50 employees or more, there’s a different set of rules for them. But we’re going to find that the majority of those have already provided healthcare for the majority of their employees.
CAVANAUGH: And, Ruben, just staying with the small businesses for a minute because, of course, that’s what you deal with, there’s a different dynamic when there’s a business that has like 3 or 4 employees and the owner. People usually get along really pretty well…
CAVANAUGH: …they become friends and the idea that the employer may now be able to offer a benefit that wasn’t – they weren’t able to offer before, I would imagine that at least on some level there is some enthusiasm for that.
GARCIA: Oh, absolutely, Maureen. As a matter of fact, you know, it’s not that most small businesses or small business employers don’t want to give healthcare to their employees, it’s that they can’t afford it. It’s too expensive, and the reason for that is because small business pays generally about 18 to 20% higher premium than the larger companies. So if you have 50 employees or more, you have a bigger pool to work with, insurance companies will drop the rates and they’ll be about 15 to 18 to 20% lower. That doesn’t happen for the small business so it makes it difficult for them. But this new plan, this new bill, well, actually, it’s a new law now and as a public servant, I have to enforce it. But this new law is really great because it’s going to reduce the cost to the employer and bring it down to a level that’s really, really accessible to them. Just an example, let’s say it’s a $1000 policy, you know, a good premium policy that healthcare, $1000 for the employee. The employer says, you know, if I pay 50% of it’s going to cost me five hundred bucks. But, really, what’s going to happen is they’re going to get another 35% in tax incentives for what they’re paying on that and that brings the cost down to basically 15%...
GARCIA: …for the employer…
GARCIA: …which is really, really reasonable. You’re talking a hundred and fifty bucks to give your employee, you know, a thousand dollar coverage, you know, per month.
CAVANAUGH: Richard, I’m wondering, I know that you’ve been an advocate for health reform for some time now. What is it that you like about this bill, and I’m assuming that you do like this bill.
LEDFORD: Oh, yeah. I guess when Mr. Barrales talked about some of the smaller business members at the Chamber that are enthusiastic about the reform measure, I would be one of those. Before we do that, I think we ought to frame just how important this is to the San Diego business community overall because you mentioned 90% of the businesses being small. It’s closer to 95…
LEDFORD: …in the region that are 50 or smaller. More importantly, 80% of the businesses in our region are less than 10 – 10 or less employees, and 60% of those with 10 or fewer employees don’t provide insurance opportunities at all. So there’s a tremendous opportunity here for the small business community to take advantage of the very things that Mr. Garcia just mentioned. Just from a budgetary standpoint and, you know, from my personal budget, for my office it’s about 23% of my monthly expenses go to healthcare premiums. And if you look at what the cost would be without any reform at all to the small business community nationwide, in the next ten years small business would spend close to $2.4 trillion dollars for healthcare costs. So when you look at the opportunity that has been presented to us, there’s some things in here that are wonderful. You know, the first thing I would start with, Maureen, is that there’s no mandate. For most of the businesses in San Diego, they can choose to participate if it makes economic sense or not. That’s a wonderful thing because as a small businessperson, my margins are thin, the profit is thin, and I ought to have some options that, in this case, the reform measure’s providing me. And then again, Mr. Garcia mentioned two really huge things for us in the small business community, the exchange pool that’s being formed that’ll allow us the same power to negotiate a lower cost health insurance premium with the same kind of leverage that large companies have, that’s being formed. And, of course, the opportunity for tax credits, that’s going to be an important one, too. And, again, Mr. Barrales talked about the 35 and you mentioned the 50%, that’s a sliding scale…
LEDFORD: …and it depends upon your average salary within your company so there’s some opportunities there for us to figure this out. There’s one area that we haven’t talked about and that’s the MediCal expansion here in California because…
CAVANAUGH: And I would like to talk about that. We do have to take a really short break.
LEDFORD: All right.
CAVANAUGH: When we return, let’s take that right up where we left off, okay?
LEDFORD: All right.
CAVANAUGH: Okay, we’ll – We’re taking a short break. When we return, we’ll continue to talk about how business, America’s business owners and especially San Diego’s business owners are reacting to the new rules and regulations in the healthcare law. You’re listening to These Days on KPBS.
CAVANAUGH: I'm Maureen Cavanaugh. You're listening to These Days on KPBS. We’re talking about how the new healthcare law will affect businesses in San Diego. My guests are Richard Ledford. He is owner of Ledford Enterprises. And Ruben Garcia is district director of the U.S. Small Business Administration in San Diego and Imperial Counties. And, Richard, I cut you off when you were just going to tell us about something having to do with Medicare and the new healthcare law.
LEDFORD: Sure. We were on a roll there for a minute.
LEDFORD: Yeah, the MediCal expansion provision is an important one, I think, for small businesses. What it does is it allows for an expansion of the MediCal eligibility requirements. Now by itself that doesn’t sound like much but remember that many of our businesses are sole proprietorships here in San Diego County and many of them are so small they’re basically families. In fact, Mr. Garcia referred to that relationship between the small business owner and their employees. Oftentimes, they’re – really are family. So one of the issues here is how do we reach those who are at the very low income level and provide them health insurance? And this expansion opportunity gives the small business employer one more opportunity to provide insurance through – in this case, through a government funded program that they don’t have currently. So that’s – All that’s not talked about too much and perhaps Mr. Garcia has some comment on it. It really does give us one more of those options that’s available in addition to the exchange program, which is going to be great. And, of course, the issue of tax credits.
CAVANAUGH: I do want to take a phone call right now, if I may. Gregory is calling us from San Ysidro. Good morning, Gregory. Welcome to These Days.
GREGORY (Caller, San Ysidro): Good morning. How are you?
CAVANAUGH: Fine. Thank you for calling.
GREGORY: Great. Thank you very much. Thanks for taking my call. Your first guest, the guy from the Chamber of Commerce, I think he was a little bit more pessimistic about this program as well as he probably was not as – I don’t think he was really that up to what he should’ve known about this particular law. In the first place, as a small business owner, I’ve got 25 employees in San Ysidro. And it’s my understanding that when these exchanges are set up, that there’ll be incentives out there for me to be able to buy insurance for my employees…
GREGORY: …as well as then there’s going to be also incen – there’s going to be incentives for my employees to be able to pay for their premiums and for – I mean, to help them with their premiums and the co-pays.
CAVANAUGH: Gregory, let me get feedback on this from Ruben Garcia. So far is Gregory correct in his understanding?
GARCIA: Yeah, Gregory’s absolutely correct. I want to congratulate you, you understand this very well.
GREGORY: Thank you.
GARCIA: The exchanges will be state-based, introducing local competition to help increase available options for coverage. And the exchanges are to help the small business pool their risk together to ultimately access affordable plans. Right now, small business don’t have the economy of scale that large business do to offer competitive coverage. So as we get into these pools, you’re going to see the rate and the cost reduced greatly, perhaps as much as by 20, 25% over what it is for small business right now. A great point, Gregory.
CAVANAUGH: And, Gregory, I just wanted to ask you one question. So, so far you’re liking what you hear about this new law?
GREGORY: I love what I hear, exactly, because I appreciate my employees and I certainly want them to have insurance and most of them don’t. So this is going to be great.
CAVANAUGH: Thanks for the call, Gregory. Ruben, I wanted to ask you, are – I know that you’re a public servant and, indeed, you will enthusiastically work out this law. Is there anything about this legislation that perhaps you’re concerned about?
GARCIA: Yes, I’m concerned, Maureen, that because there is no mandate for the small business to participate that many small businesses are not going to participate or that they’ll hold back and they’re going to say, well, I want to look and see, you know, what everybody else does. I want to encourage small businesses, if there’s a small business owner that’s listening right now, you need to think about participating because the more businesses that participate, the lower the cost will become. In other words, if more businesses get into this pool, this exchange pool, and Richard Ledford was talking about that, Richard was absolutely right, we need to have an understanding of how this system is going to work. The pool has got to be large enough so that it’ll be beneficial to the insurance companies to lower the rate because they’ll see a great number of small business participating. And so – And he was right when he said there is no mandate, absolutely no mandate…
GARCIA: …that requires a small business under the 50 employees to participate in this.
CAVANAUGH: I want to ask you both a question, if I may. This new law as opposed to what people were talking about, Medicare for all or even single payer still has most people getting their health insurance through their employer. And I wonder, Richard, do you think that’s a good thing?
LEDFORD: Yeah, I absolutely do, and part of it has to do with a very philosophical belief I have that the business community does have a responsibility to the people that work for it, the people that help produce the profit and create the jobs and pay the taxes. So there’s a philosophical view to that. There’s also a very practical one and that is that the majority of Americans are used to getting and accessing their health insurance through the workplace and so that’s an easy thing. We’re not teaching them to start all over again with a new system; they know where to go. The employer has the information or makes the information available and that really makes it a pretty smooth process.
CAVANAUGH: And, Ruben, are you pleased that we’re still seeing the business being the source of most of this group insurance that people have?
GARCIA: Absolutely, Maureen. One of the things that we’re grateful is that small businesses now will be able to do this. You know, it wasn’t – And health insurance is not a right. I mean, you’re not forced to have it. Now you will have it. You have the option now to be able to get it, and that’s the wonderful thing about it, is people now will be able to get it through their employer, and the employer will have it at a lower cost. The reason they weren’t offering it, a lot of small businesses and even the mom and pops, Richard was talking about that, you know, they’re family owned and a lot of them would just say, you know what, we’re not going to put any health insurance into the business because we can’t afford it, you know, and we’ll just have to take care of each other and make sure that we don’t get sick, etcetera, that kind of thing. That mentality is going to change now and people are going to look at this and say, you know, why can’t I give coverage to my wife and to my daughter who works in the grocery store here with me and – and now have them covered. It’s a great opportunity and change.
CAVANAUGH: I’m afraid we have to wrap things up. This went very quickly. I think we’ll have to come back to this topic at a later date. I want to thank you both. Thank you, Richard Ledford and Ruben Garcia. Thanks so much for talking with us.
GARCIA: Absolutely. Thank you.
CAVANAUGH: And earlier in our conversation we spoke with Ruben Barrales, president and CEO of the San Diego Regional Chamber of Commerce. You’re listening to These Days on KPBS.