Healthcare is a complicated and highly politicized topic. Google this post’s title, and you’ll find ample opinion both for and against Medicare for all, a solution proposed by presidential candidate Bernie Sanders and others. When it comes to small business owners, however, opinion is less divided, with a growing number of supporters. But, politics aside, how would Medicare for all potentially affect small businesses? The answer starts with a more in-depth look into our current system and the proposal to change healthcare.
Medicare – our national health insurance program
Currently, Medicare is the national health insurance program primarily for those over 65. Medicare also covers some younger people with disabilities and other conditions, but in general, the program’s scope is limited to older adults. While the current plan’s eligibility is limited, funding comes from payroll taxes imposed on all workers and employers. Workers pay a 1.45% tax on their earnings, and employers pay an additional 1.45%. Also, some Medicare costs are paid by plan participants through monthly premiums, copays, or other fees.
Small business and healthcare
Under the current state of affairs, small businesses that have fewer than 50 full-time employees are not required to provide health insurance. Larger companies that fail to do so, as provided by the Affordable Care Act (ACA), are subject to fines. But if we focus on those businesses that are exempt from the ACA, the mandatory cost of healthcare to a small business at present is 1.45% of wages
Despite what may or may not be mandatory, businesses often provide health coverage as a benefit, and failing to do so can cost them good employees in a thriving job market. So, in reality, the actual cost of health care to small businesses can be much higher than just Medicare tax.
The expansion proposal
Medicare for All would replace our current healthcare insurance system, which primarily involves private insurers and some government services provided to a small group. Every citizen and legal resident would be entitled to coverage. Under some proposals, Medicare will be an option for all, but those with private insurance could continue to pay for healthcare coverage privately. Cost estimates vary depending on which study you read. Still, it’s safe to assume that the cost of covering everyone versus only a small percentage of the population will be much higher than the combined 2.9% payroll tax will raise.
The tax effect on small businesses
Under Sanders’ plan, for example, the employer portion of Medicare tax will increase from 1.45% to 7.5%. This increase would only apply to the first $2 million in wages, so smaller businesses that fit under this ceiling will not see an increase. The current plan has similar protections for small businesses, with no premium for those with under 50 employees. Still, these businesses currently pay 1.45% on every penny they spend in wages, regardless of the number of employees or their total payroll.
The wellness effect on small businesses
Looking beyond payroll, proponents of Medicare for All believe the program will result in a healthier population in the country. This, according to backers of the reform, translates to fewer sick days, happier employees, and increased productivity.
Also, Medicare for All will potentially remove the connection between employment and insurance. In other words, employers and employees will be free to negotiate terms of employment without bringing health benefits into the mix. The precise effect of this situation is unknown, as employers who no longer have to pay a share of a premium may have this savings canceled out or negated through additional taxes.
Healthcare reform is an essential issue for small businesses. An increasing amount of these businesses are calling for a change, as healthcare continues to become more and more expensive.