The Treatment Is Worse Than the Disease

Earlier this year Governor Schwarzenegger put forth a bold new health care proposal for California, requiring that all Californians purchase health insurance. While laudable, there is concern that the subsidized coverage which is promised to those who cannot afford insurance could put a serious strain on an already over-burdened budget, even with companies pitching in 4% of their payroll to a state account, should they decide not to provide insurance to their employees.

In response, Democratic legislators have put together their own proposals, which would require companies to foot a larger piece of the pie:

Escalating the already tense fight about what financial burden businesses should bear, the Democrats who control the Legislature proposed Tuesday that most California employers be required to spend the equivalent of at least 7.5% of their payrolls on health care — nearly twice the amount Gov. Arnold Schwarzenegger has proposed.

The mandate on employers would raise more than $5 billion and — along with federal taxpayer money and worker contributions — allow California to extend insurance to about 69% of the 4.9 million people who lack it at any given moment. Among states, only Hawaii has a significant employer mandate. But the Democratic proposals in California would go further by including dependent coverage and more part-time workers.

Those of us to the left-of-center tend to celebrate proposed legislation that helps those who, for whatever reason, cannot do for themselves. Especially if large corporations are the ones who contribute a healthy percentage of the costs.

The problem with this, however, is that large corporations, as a rule, already offer health care benefits to their employees and would not be required to give to the state fund unless the employee benefits equaled less than 7.5% of payroll. So guess who the burden to fund the desperately needed health care state fund would fall upon?

The small business owner.

Another thing that we liberals tend to like to encourage is independent business. We usually like our local mom-and-pop record stores and book stores over the soulless mondo-stores. We think Geek Patrol is kinda neat, but prefer to give our computers to the repair guy in the neighborhood who is a wiz at retrieving our info from fried drives. And isn't it better for the little guy to make money at coming up with new toys than for Mattel to rake in even more from ever-expanding toy opportunities?

Problem is, the average small business owner simply cannot afford to contribute 7.5% of payroll. That's assuming employees can even be afforded. Says Larry Spinak, founder of CompuNerds, "I have two employees, but they're really subcontractors and I use them part time. A big reason I don't have regular employees is because I can't afford all the benefits, etc. Another 7.5% would make it even more difficult."

And for those who do have employees? The proposed requirement could potentially put them out of business. According to a local business owner working in the toy industry (who prefers to remain anonymous), "Any additional tax on small business is potentially crippling. 7.5 percent of payroll is a huge number once you know that payroll is the largest expense in any business, 40 to 70% of all company income in many cases. Add that to the myriad of existing taxes - state, federal and local - insurances required by law, unemployment contributions and the ever famous 7.5% matching funds for Social Security. [...] This expense can make the difference between hiring and not hiring and not having a business to employ anyone including oneself."

Many large companies, should they decide the requirements of a certain state are too onerous to their bottom line, can opt to move to a friendlier state. It's not cheap, but they have the resources.

Not so the small business. Even if the business isn't tied to the community - as many of them seem to be - uprooting to another street would be prohibitive, let alone another state. We'd lose more of what we lefties love and there are precious few of those independent minded business folks as it is.

This is another reason why single-payer health care is so important to Californians. The system needs to be completely revamped and the playing field needs to be leveled, but not on the backs of the poor.

And not on the backs of small business owners.