Teetering on the edge of destruction

It’s hardly surprising that the Hartford Business Journal is happy about the new Health Care Takeover legislation: Hartford has long been considered the Insurance Capital of the World, and the insurance companies are thrilled with the forced enrollment of 32 million Americans into their health insurance plans.

With sweeping federal health care reform now on the books, business owners are scrambling to make sense of a new range of tax breaks, coverage responsibilities and potential pitfalls by turning to benefits consultants, accountants and insurance brokers for advice and perspective.

Although the $940 billion legislation alters the way small businesses buy and supply health insurance, many of the changes won’t kick in until 2014. And clear answers are at a premium today.

“Small business owners will have more choices and greater accessibility to affordable health insurance, which will help them to attract and keep a talented workforce,” said Kevin Galvin, owner of Connecticut Commercial Maintenance Inc. in Hartford. He says small businesses like his will be the big winners under health care reform.

In fact, in the entire article, only one opponent to the legislation is quoted. Four proponents are interviewed, and two of those are from advocacy groups specifically in favor of the legislation. One more is a health insurance executive, and even Mr. Galvin quoted above, a small business owner, is also an organizer of a pro-legislation political organization.

No independent small business owners were interviewed. No attempt to actually look at the cost of the mandates. It’s largely Democrat talking points in the guise of an article.

The Small Business Health Options Programs, known as “SHOP Exchanges” — essentially a purchase pool that gives employers buying power and pools risk — will create healthy competition among insurance carriers, which will help control costs, said Galvin.

While it is probable that the SHOP Exchanges will help a few small businesses already struggling with providing health insurance coverage, other businesses whose business model is built upon having the lowest costs will not be helped. And if pooling resources is what these small businesses want to do, why not allow them to pool together independently instead of creating a costly new government bureaucracy?

It’s nice to say that every employer in America should provide health insurance. It makes us feel good that we’re “helping people,” but the fact is that some businesses simply cannot survive that way and will be either driven out of business or forced to cut employment. Why place this economic road-block on these businesses?

Particularly hard-hit will be new start-up businesses. Many of these firms simply do not have the resources to provide health insurance. The “sexy” start-ups that lead to big Wall Street IPOs get all the news media attention, but the vast majority of new businesses are home-based or in small storefronts or workshops and have only the owner’s savings or a small business loan for support. This kind of start-up will now face an even higher hurdle before it can achieve profitability and later seek to expand. Either they pay for insurance, or they start paying penalties; either way, the mandate makes it harder for them to succeed and grow.

This type of mandate is wrong for many reasons, but the economic reasoning isn’t hard to follow. The higher the costs for business, the greater the difficulty that business will have to make a profit. Business owners will not operate at a loss indefinitely, and so they will eventually cut costs somewhere.

This Health Care Takeover will cost American jobs. It will ruin the businesses that are already teetering on the edge of destruction. As more businesses fail, more people will come crawling to the government for help.

It’s the wrong solution at the wrong time, pure and simple.

Cross-posted at Seeking Liberty.