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Help small businesses by reducing insurance mandates

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Governor Abbott proclaimed last week, May 9-15, as Small Business Week in Texas, a fitting designation considering that small businesses make up more than 99 percent of businesses in the state and employ millions of Texans.

As we celebrate Texas entrepreneurship and our business-friendly environment, we should also take note of a threat that can keep small businesses, and Texas as a whole, from thriving: the increasing cost of health insurance from increased mandates.

In a recent survey, small business owners in Texas ranked the cost of health insurance as their single biggest problem, and the COVID-19 crisis has only accelerated the concern.

What drives this cost? The major factor is the increasing number of health care benefits the state requires. When the government mandates non-essential coverage, a small population may benefit, but the cost of mandates is passed on as higher premiums for everyone with health insurance. This becomes a hidden tax for employers, who may cover premiums or other insurance-related costs.

Additionally, measures that keep health plans from cracking down on fraud, waste, and abuse make health care more expensive, less efficient, and sometimes even dangerous due to risks from overtreatment. Furthermore, when the cost of care increases, patients are deterred from seeking primary care and are more likely to end up seeking emergency medical care, which costs more than routine and primary care and in turn increases the costs of premiums

Texas is already a leader in the number of costly health insurance mandates, ranking third in the nation for the most mandated benefits. Just this year, 114 mandate bills have been introduced in the Legislature, and 38 mandate bills have already passed out of committee.

Not only is this bad for Texas small businesses, it hurts employees who may have to pay more in copays and deductibles or lose health coverage completely. While 99. percent of large employers offer health benefits, only 56. percent of small employers do. Firms not offering health benefits continue to cite cost as the most important reason. Research shows that one in five of these small businesses would offer health benefits if there were fewer mandates.

One in three small business owners is struggling to provide health coverage for themselves and their workers. About 36. percent lowered their employer contribution to workers’ premiums and over half switched to a plan with lower premiums. Nearly one in five of those surveyed said they would need to make changes or reduce health coverage in the coming months. Employees ultimately pay the high price of mandated benefits through high premiums, higher co-pays, reduced wages, benefit reductions, or job loss.

Texas small businesses need lawmakers to carefully consider any new mandates before requiring small business owners to cover the costs. At a time when many are scraping together every last penny to pay employees, our representatives should be helping employers, not hurting them.

One bill that would help legislators do that is House Bill 2600 by Rep. Dennis Paul which would provide a fiscal impact statement for each bill that creates a new mandate for health benefit coverage. HB 2600 would allow legislators to fully appreciate the impact of new mandate laws, likely reducing the number of new mandates adopted and helping to stop escalating insurance costs for Texans.

The information needed to create the fiscal impact statements already exists. State law requires agencies such as the Texas Department of Insurance to consider increased costs to people and entities subject to new state regulations, but this information is not provided to lawmakers.

At the federal level, the Congressional Budget Office already offers similar analysis for Congress, and 26 other states have mandated benefit review (MBR) laws. Some larger states like Pennsylvania, Virginia, and California have additionally set up new agencies to do the review.

Policy makers owe it to small businesses owners to consider the costs before adding additional mandates to health insurance. Changing the culture around health care mandates would allow the Texas Legislature to celebrate Small Business Week this week and every week by actively promoting an environment where employers can thrive.

Annie Spilman is the State Director for the National Federation of Independent Business.