By Kathleen Sebelius
March 31, 2010
As governor of Kansas, one of my biggest priorities was bringing jobs to our state and keeping them there.
I spent a lot of time talking to Kansas business owners, from farmers to the CEOs of some of our state’s biggest companies. When I asked them about their biggest concern, they often gave the same answer: health care costs.
Over the last decade, a lot of American business owners felt the same way. With insurance premiums skyrocketing, many firms cut back, offering fewer health benefits or dropping coverage altogether. Small businesses were hit especially hard: over the last 10 years, the share of small firms offering health benefits fell nearly 10 percent as premiums for their employees more than doubled.
But now, help is on the way. The Affordable Care Act gives businesses immediate relief from rising premiums, improves their insurance choices over time, and begins to stabilize out-of-control health care costs. After years of talking about the growing burden of health care on businesses, we’re finally doing something about it.
For example, starting this year, many small business owners will be eligible for a tax credit for up to 35 percent of their contribution toward their employees’ health insurance premiums. In 2014, that tax credit goes up to 50 percent. Nationwide, it’s estimated that about four million small businesses will qualify, providing $40 billion in relief over the next 10 years.
The Affordable Care Act will also help our small businesses negotiate lower insurance rates. Right now, mom-and-pop shops don’t have much bargaining clout. As a result, they pay 18 percent more than large businesses for the same coverage.
With the new law, that’s going to change.
Beginning in 2014, businesses with 100 or fewer employees can join a new health insurance marketplace called an exchange.
Not only will this exchange simplify the process of buying insurance and slash administrative costs, it will also allow businesses to pool their buying power, giving the local corner store the leverage to negotiate the same low rates as the supermarket chain around the corner.
But there’s help in the Affordable Care Act for America’s biggest employers, too. Many of these companies operate early retiree insurance plans that have become a huge drain on their balance sheets. Beginning June 1, the new law will establish a temporary reinsurance program for these firms. This will allow employers to be partially reimbursed for excessive retiree health care costs while securing the health coverage promised to retirees.
Part of the reason these retiree health plans are so expensive is that the cost of health care has been rising — largely unchecked — for years. The Affordable Care Act changes that, too, with the broadest package of health care cost-cutting measures in American history: from investing in prevention so we can keep Americans healthy and out of the emergency room to reimbursing providers based on the quality, not the quantity of care they provide.
That’s why I’ve been so disappointed to read some of the commentary inaccurately claiming that the new law will hurt American businesses. As any businessperson will tell you, health care costs have been a growing burden for years. Far from adding to this burden, the Affordable Care Act takes the most aggressive steps in years to help firms provide health coverage for their workers — something employers tell me is crucial for them to recruit and retain the best workers and be more competitive in the global market.
As we continue to implement this historic new law, America’s businesses and employees can look forward to better days.
Kathleen Sebelius is the U.S. secretary of health and human services.