Health Care Debate Divides Small Businesses - TheStreet

WASHINGTON (TheStreet) --

Is health care reform destined to be a boon or a bust for small businesses? That's the billion-dollar question.

President Barack Obama has been trying to build public support for the government's plan to provide health insurance to all Americans for weeks, taking a break from his town-hall meetings to hold a televised news conference last week. Small-business owners, a key constituency, remain divided in the reform debate.

On July 25, the White House stepped up its efforts to court small-business owners by issuing a report that says these firms pay 18% more for their employees' health insurance than large companies. According to the report, 49% of firms with 3 to 9 workers and 78% with 10 to 24 workers offered health insurance to their employees last year. In contrast, 99% of firms with more than 200 workers offered health insurance.

The National Federation of Independent Business, a lobbying organization for small businesses, has been critical of the government's plan. The organization recently circulated a petition that says the House's plan would hurt profits at a time when firms are struggling to find capital. The group says the plan "threatens the viability of our nation's job creators" and "fails to address the core challenge facing small businesses -- cost."

The Small Business Majority (SBM), a group formed specifically to lobby for health care reform, offers a more optimistic view.

"For too long there's been this feeling that if you're pro-business, you're against health reform," says John Arensmeyer, its chief executive officer. "Regardless of their political views, all small business owners want lower health care costs, so they can grow their businesses and offer insurance that enables them to attract and retain good employees."

An SBM analysis, conducted by Massachusetts Institute of Technology economist Jonathan Gruber, used a simulation model to gauge the impact of health care reform on businesses with 100 or fewer employees. The study says that, without reform, small businesses will pay nearly $2.4 trillion dollars over the next 10 years in health care costs for workers.

The study says small businesses could save as much as $855 billion with reform. Without reform, the study projects that 178,000 small-business jobs will be lost in 2018 as a result of health care costs. A new plan could spare as many as 128,000 of these positions, the group claims.

For independent pharmacists, the debate has been even more complicated.

"When people think about healthcare reform they first think about the doctors and the drug manufacturers and insurers," says John Norton, spokesman for the National Community Pharmacists Association (NCPA), a group that represents 23,000 pharmacies. "We have to struggle to make sure that they understand we are not just dispensers of pills, that these are clinically trained professional who can provide a lot."

Norton says the defining difference between independent pharmacies and larger chains like


(CVS) - Get Report





Rite Aid

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Duane Reade

is the latter group's high-volume approach to prescriptions. The current system favors them over independent pharmacies, many of which serve rural and inner-city neighborhoods the larger chains have little or no presence in, his organization claims.

The NCPA is calling for more regulatory oversight for pharmacy benefit managers (PBMs), which act as a middlemen between pharmacists, physicians, insurers and patients. The group says PBMs can influence the medications to which patients have access, determining the rates pharmacists are paid and limiting the ability of patients to fill prescriptions at community pharmacies.

The group claims that some PBMs refer patients to their own mail-order facilities, even in federal government programs, and some have been found to switch patients onto more expensive medications in order to maximize their revenue.

The average community pharmacy pockets 40% of its revenue from Medicare and Medicaid, Norton says. But reimbursement reductions in generic drug payments and "onerous regulations and fees" regulations on medical supplies are cutting into already slim profit margins.

-- Reported by Joe Mont in Boston. Feedback can be sent to