Businesses, Health Care

The Aug. 19 article “Don’t Bring Down Small Businesses in Process of Reforming Health Care,” notes some of the concerns that businesses have with the increasing number of employer mandates. Policy-makers who favor a requirement that employers provide health care for employees should also recognize the traditional definitions of “small business” vs. “large company” aren’t always appropriate.

Many small employers have a very high profit per employee. For example, investment firms generate tens of thousands of dollars in pure profit for a single hire.

On the other hand, some large companies employ thousands of workers in entry-wage positions. They operate on low levels of profit per each employee.

A “play-or-pay” mandate based on number of employees disproportionately impacts these businesses. A $400-per-year-per-employee health-care premium would be less than 2 percent of the profit of a small investment firm but a devastating 20 percent of profits for a casual-dining restaurant.

Senior Economic Analyst
Employment Policies Institute