NCPA - National Center for Policy Analysis


February 9, 2009

Employer mandates have reemerged as a frequently mentioned tool to help finance increased insurance coverage.  Proponents argue that such policies will finance higher coverage rates.  Opponents, however, caution that any gains in coverage will come at the price of lost employment and output, increased regulation, and additional business costs.  Small businesses, which bear a disproportionate share of regulatory costs, would face steep challenges in the form of increased employer contributions and search and administrative costs.

The NFIB Research Foundation analyzed the potential economic impact of a national employer health care mandate on small businesses:

  • The results indicate that without major reductions in the cost of health care, the employer mandate would cause the economy to lose over 1.6 million jobs within the first five years of program implementation.
  • Small firms would be most adversely affected by the mandate and account for approximately 66 percent of all jobs lost.
  • Almost all sectors except those in healthcare would shed jobs, and real GDP would contract by $200 billion.

"In our current economic environment, it is so important that we stimulate and support our country's job creators -- small businesses.  Enacting healthcare reforms that fail to address rising costs, and place unmanageable burdens on business, is not a viable pathway for meaningful reform," says Todd Stottlemyer, president and CEO, NFIB.  "It is important that reform fosters growth and doesn't place undue burdens or new financial pressures on these small employers."

Health care premiums continue to skyrocket, increasing by nearly 130 percent in just eight years, and are, on average, 18 percent higher than those of large businesses.  These unsustainable costs significantly hinder small businesses' ability to invest in and grow their business.  Health care reform legislation must take steps to curtail costs for small businesses, individuals and the self employed by pursuing creative approaches to pooling, tax code parity, and improved, competitive insurance markets.

Source: Michael J. Chow and Bruce D. Phillips, "Small Business Effects of a National Employer Health Care Mandate," NFIB Research Foundation, January 26, 2009.


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