Play-Or-Pay Is Not A Game

The article “Small businesses turn against Obama health plan” (Page 1, Monday) notes that many small businesses have concerns about a mandated health care plan. However, it does not elaborate on how such a plan would hurt these enterprises. Various policymakers have devised legislation that requires employers to provide health care for employees, but their proposals fail to distinguish “small business” vs. “large company.”

Many small-business employers have a very high profit rate 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 but operate on low levels of profit per employee.

A play-or-pay mandate based on the number of employees disproportionately impacts these businesses. Consider an annual $400-per-employee health care premium, which 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