Small Business Weekly: Some see health plans cancelled, others scrap them voluntarily

November 25, 2013

A review of some of the biggest small business and start-up stories from the past week, with a focus on Washington.

Shielding small firms could prove costly for states

As Congress continues to wrangle over online sales tax legislation, new research shows that an exemption for small sellers would prevent states from collecting taxes on more than $100 billion worth of online commerce.

That represents nearly half of sales over the Internet, according to the study by the Small Business Administration’s Office of Advocacy, and it could cost states as much as $10 billion every year compared to a bill without a safeguard. One of the goals of the bill was to generate more revenue for state and local governments.

Another was to level the playing field for online and brick-and-mortar sellers. However, the study suggests that local merchants would continue to face virtually the same handicap against their online competitors, only a small fraction of whom would be required to collect sales tax as a result of the small-seller exemption.

Small business owners bemoan loss of health plans

During a hearing last week before members of the Senate, several entrepreneurs urged Congress to take steps to help employers keep their existing insurance plans and control their health care costs. Some said their company’s plans were among those nixed by insurers because they do not meet new minimum standards in the health care law.

Drew Greenblatt, who owns Marlin Steel Wire Products, a small manufacturing company in Baltimore, told lawmakers his “old plan was a good, quality product that I liked very much, but we were forced to give it up.” His company resorted to a new plan with several new benefits he didn’t want and a 10 percent increase in his premiums.

Sheila Salter, who owns Early2surg, a consulting firm in North Carolina, finds herself in a similar position. “I was shocked back in September when I received notice from Blue Cross Blue Shield that my health care plan was being cancelled,” Salter said.

Other small firms ditching their plans

Nearly one-third of small-business owners say they are likely to scrap their health care plans in the next five years, jumping up from 19 percent just two years ago, according to the latest poll by Mercer, a human resources and financial consulting firm. In the Washington-Baltimore area, however, the number drops to 10 percent.

Onefactor in the decision is the cost of providing care, which jumped 8.1 percent last year to an average of $11,908, according to the survey of firms with fewer than 500 workers. Most of the employers who said they would likely drop their plans were the particularly small ones, researchers pointed out.

Congressmen pitch bill to delay health insurance tax

Reps. Ami Bera (D-Calif.) and Charles Boustany (R-La.), both licensed physicians, last week introduced legislation that would delay for two years a new tax in the health care law that is expected to drive up premiums particularly for small firms.

Often called the Health Insurance Tax (or HIT tax), the rules levy a fee on insurers based solely on their share of what is known as the fully insured market, in which most small businesses purchase their plans. Consequently, many fear the added costs will be passed directly to employers on Main Street.

Main Street divided on wage hike

Nearly half (47 percent) of small business owners support proposals to increase the country’s minimum wage to $9.50, even though most respondents (60 percent) acknowledged the change could hurt their business, according to a new survey of around 600 employers conducted by Gallup and Wells Fargo.

What are you keeping an eye on this week? Please let us know below.

Follow J.D. Harrison and On Small Business on Twitter.

J.D. Harrison covers startups, small business and entrepreneurship, with a focus on public policy, and he manages the Post's On Small Business blog.
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