Ideas & Action Blog

Where Do the Interests of Small Business Really Lie in the Health Care Debate?

Posted by Michael Lipsky at 3:02 PM on July 21, 2009

Last week the National Federation of Independent Business (NFIB), the indisputably powerful small business association in Washington, sent a letter to House members informing them that the organization could not support a substantial role for government in administering American health care. Widely credited with helping to scuttle the Clinton health care plan when the subject was last on the national agenda, the NFIB has taken a stand against a 'public option' after months of supporting health care reform, but hedging its bets on the best way to achieve it. NFIB has also come out against requiring employers to provide health insurance for their workers or pay a fee to cover them.

'Small business,' like the 'family farmer,' plays an iconic role in American politics, conjuring up the hard working entrepreneurs who are central to the American self-reliance narrative. Since NFIB is the long-time face of small business in Washington, how it characterizes the interests of small business is a significant political fact. A measure of the regard of small business in the American mind is reflected in a 2005 Harris poll: 90 percent of respondents believed big business had too much power and influence in Washington, but fully 92 percent thought that small business had too little power.

One source of the NFIB's legitimacy is that it regularly polls its 350,000 members. Only a certain proportion respond to the group's periodic questionnaires, and the questions asked are often simplistic. Still, the conclusions the organization draws of its members' views appear to be reasonably representative.

The problem is that the NFIB membership is not representative of American small business. There are 27 million small business owners in the United States. Only a little more than one percent are NFIB members. It is possible that NFIB members are representative of small businesses in general, but research based upon broad samples of all small business owners regularly reveals that this is not the case.

Consider a study conducted by the Robert Wood Johnson Foundation. It found that 70 percent of small business owners favored government managed purchasing pools, and two-thirds agreed that business should contribute to a reformed system along with government, the health care industry and individuals. Depending on the state, half to 80 percent of respondents agreed that businesses should pay something toward the health insurance of their workers.

These findings have recently been confirmed by polls in 16 states conducted by Small Business Majority, a relatively new organization focused on representing the interests of all small business, not just NFIB members. SBM has also looked into the implications for small business of a reformed health system in which--with expansion of Medicaid to all below the poverty line and guaranteed access to coverage--all parties contributed something to health costs. The research seems to confirm the judgment of the nation's small business owners-as revealed in the study mentioned above--that health care reform including small business contributions would be good for them.

In the study, Jonathan Gruber, an MIT economist, modeled the likely results of a health care system in which government guaranteed coverage and business as well as others contributed to the cost of reform. He found that small business would save hundreds of billions of dollars under such a plan, with no loss of jobs or reduction in wages, under various scenarios that provided tax credits and sliding scales for employers' contributions based on their ability to pay. This finding contrasts sharply with the NFIB conclusion that health care reform in which small business was required to contribute would be unaffordable and stunt job growth.

UPDATE (7/27): A recent Economic Policy Institute analysis reports comparable results. EPI examined the likely impact on small business owners of a health reform plan that included an individual mandate and a pay or play requirement for business owners. Small businesses which already provide health care received the greatest economic boost, but small business in general came out ahead, even if, after subsidies, they had to pay something toward insuring their workers.

The NFIB typically supports tax cuts and opposes tax increases, as if these were the only matters in which small business has a stake. However, those small businesses that pay low wages benefit from programs that supplement workers' earnings and provide workers with subsidized child care and health insurance. These programs increase workers' productivity and reliability-a critical matter to the small employer.

Moreover, the mom and pop grocery and the Rust Belt machine shop are no longer the only exemplars of small business. An increasing number of small businesses are based upon creative, professional and engineering occupations.

To attract and retain workers these businesses depend upon good schools, public universities turning out trained graduates, and cultural and environmental attractions. They thrive in rich public environments supported by an active public sector. Among the farmers, book sellers, lawyers, music store owners, bakers, architects, cookie distributors, caterers, web designers, child care operators and toy manufacturers in my circle of friends, none favors lower taxes over decent health care and good schools for all.

In recent days, as another critical piece of legislation-the cap-and-trade climate change bill--was being debated, the major lobbyists for big business have remained on the sidelines. The Chamber of Commerce and the National Association of Manufacturers were immobilized because their members were split on the critical issues. There are very good reasons to think that at the very least, small business is similarly divided on health care. Small Business Majority, the Main Street Alliance, and other groups representing an alternative to the NFIB perspective deserve greater recognition.

Michael Lipsky is a Senior Program Director at Demos. His article, with Nicole Kazee and Cathie Jo Martin, "Outside the Big Box: Who Speaks for Small Business?" appeared in the July/August issue of the Boston Review.

Tags: Healthcare | Business & Industry