Costs Of Health Mandate Varies By Business Size

Posted on August 28, 2009

By Kristen Lopez Eastlick
Employment Policies Institute

The Aug. 23 news report “Small businesses are key in health debate” accurately notes many of the concerns that businesses have with the increasing number of employer mandates.

Policymakers 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 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.

The Employment Policies Institute is a nonprofit organization that studies entry-level employment.