Small Business and the Healthcare Crisis, Essay Example

Issues

The first major problem facing John and Liza is to whether to hire Robert or not. John is looking to add another mechanic to the business due to rising demand for repair services and Robert is considered a top-notch mechanic. But Robert’s wife is seriously ill which may cause the health insurance costs for the business to jump up significantly. Another issue facing John and Liza concerns the recent increase in healthcare insurance premiums. This 25 percent rise in healthcare insurance premiums has been due to numerous factors such as one mechanic turning 30, two mechanics who smoke, and the risk of Mary, a new worker, of getting pregnant.

Options

John and Liza are faced with several alternatives regarding the recent increase in healthcare insurance premiums. The first option is to absorb the entire increase in costs, the second option is to encourage two mechanics to quit smoking, the third option is to ask mechanics who smoke, to pay larger share of health insurance costs, and the last option is to contribute fixed amount to everyone’s premium irrespective of their risk profile.

The best alternative for John and Liza may be to encourage two mechanics who smoke to quit smoking through some form of incentive. The first option may put undue burden on the business and even though John and Liza may not be asking the employees to foot additional burden under second option also, at least they would make efforts to reduce costs under the second option. The third option which is to ask employees who smoke to pay larger share of health insurance costs, seems fair but it may have unintended consequences such as lower employee morale among those who smoke and the worst case scenario may be two employees quitting altogether. John and Liza cannot afford this risk because the company seems to be doing well and it may be difficult to find effective replacements. In addition, there will be lost revenues and even customers between the time two employees quit and the time when replacements are found. The fourth option also has shortcomings such as some employees foregoing health insurance plan while others may have lower morale if their premiums are too high.

Other Issues

Mary should not be charged more than the young mechanics because she is a woman. Charging Mary would not only be ethically wrong but may even go against the applicable laws. Both Title VII of the Civil Rights Act of 1964 (U.S. Equal Employment Opportunity Commission) and The Pregnancy Discrimination Act (PDA) (U.S. Equal Employment Opportunity Commission) forbid employment-related discrimination on the basis of pregnancy. Charging Mary more just because her premiums are high due to the possibility of getting pregnant will be discrimination due to factors that have nothing to do with job performance or any other job-related factors.

It may also be unfair to force everyone to absorb the group’s increasing costs equally because such a measure would reward risky behavior and punish responsible behavior. It would also take away the incentive to adopt lifestyle habits that help reduce healthcare insurance premiums. The lack of accountability makes this option less desirable. Even though it may be fair to force smokers to pay more, this course of action may have unintended consequences. Thus, more effective alternative is to provide incentives to smokers to quit such as one-time bonus or paid vacation. To make it fair for everyone, other non-smoking employees may also be rewarded with paid vacations when smokers quit.

Even though hiring Robert may increase healthcare insurance costs, the costs may be more than outweighed by the benefits. Robert is considered a top-notch mechanic which would help attract customers and even convert them into loyal customers. Hiring Robert will also attract other talented applicants to the business should John and Liza further expand their scale of operations. It will send message to the current employees that John and Liza care about people and would increase their loyalty and commitment to the company.

Small Businesses and Insurance

It is harder for a small business to provide health insurance for its workers than a larger business because a small business has limited resources. In addition, small business also has higher costs because it may not qualify for volume discount that a large business may (Small Business Majority) because a large business brings more revenue to insurance providers. Another disadvantage to a small business is that since they have few employees, thus, any employee with a high risk profile has greater impact on the overall costs as compared to a large business where the impact may be much smaller.

As far as the Affordable Care Act’s (ACA) impact on John, Liza and other small businesses is concerned, it may actually help small businesses lower healthcare costs. First of all, some small businesses may qualify for tax credit and since John and Liza have fewer than 25 employees and pay average annual wages below $50,000, they have a good chance of qualifying for tax credit. Small businesses may also be able to lower healthcare insurance costs by pooling their risk such as through Small Business Health Options Program (SHOP) (U.S. Small Business Administration). Thus, ACA will help small businesses improve their competitiveness against large businesses.

References

Small Business Majority. (n.d.). Small business and the healthcare crisis. Retrieved April 25, 2013, from http://www.smallbusinessmajority.org/small-business-research/statistics.php

U.S. Equal Employment Opportunity Commission. (n.d.). Pregnancy Discrimination. Retrieved April 25, 2013, from http://www.eeoc.gov/laws/types/pregnancy.cfm

U.S. Equal Employment Opportunity Commission. (n.d.). Title VII of the Civil Rights Act of 1964. Retrieved April 25, 2013, from http://www.eeoc.gov/laws/statutes/titlevii.cfm

U.S. Small Business Administration. (n.d.). Employers with Fewer Than 25 Employees. Retrieved April 25, 2013, from http://www.sba.gov/content/employers-with-fewer-25-employees