This week Democratic presidential candidate and Vermont senator Bernie Sanders released details of his national health care plan. As a business owner, you might be left with a queasy feeling in your stomach after hearing it.
Sanders's plan is a form of single-payer system, in which a single public entity is responsible for health care financing. The plan would completely overhaul the Affordable Care Act, and provide federally administered health care coverage to U.S. citizens in a manner similar to how it's doled out in other advanced nations. But it would cost the economy, and by extension small business owners, billions or even trillions of dollars, experts tell Inc.
That's because the health care industry, which is responsible for nearly 20 percent of gross domestic product (GDP), would be forced to retool to respond to the pricing demands of the federal government, which would become the prime purchaser and provider of health care plans. Additionally, some costs for businesses would go up in the form of new taxes, even as the burden of providing health care plans to employees would diminish.
Before anyone gets hysterical, the plan has almost no chance of passing, political experts say, even should Sanders win the presidency. Thanks to a Democratic super-majority in both the House and the Senate, President Obama scarcely got the ACA--which relies on a system of state exchanges to sell private health-care plans--through Congress in 2010. In the run-up to the ACA's passage, the idea of a single-payer plan also was bandied about, and ultimately rejected.
Sanders's plan is "not a serious proposal, and it lacked the detail that large-scale health care overhauls require, leaving open numerous questions about feasibility," says John Hudak, a fellow in government studies at the nonpartisan Brookings Institution, in Washington, D.C. Among the issues the plan fails to address is a contingency for doctors, hospitals, and private health insurers who might exit the market in reaction to potentially lower pricing set by the government. As a result, the plan interjects only a note of uncertainty for business owners who are just coming to terms with the ACA, Hudak says.
Here's a look at five key proposals from the senator's plan.
1. New payroll taxes
Sanders's plan would increase taxes on business owners. Instead of the current tax rate of 2.9 percent paid jointly by employees and employers for Medicare as part of payroll taxes, his plan would increase the rate to 6.2 percent. Hudak says that in order to pay for the increased payroll taxes, employers would likely pass the costs along to employees in the form of smaller wage increases, or even wage freezes.
2. Changes to employer-provided health care
The plan would close the tax loophole that allows employers to deduct the cost of health insurance plans for their employees. While most people would presumably not need employer-sponsored plans, the deduction would disappear for business owners who might want to offer alternatives to federal plans.
3. Individual taxes
Households would pay a 2.2 percent tax to fund premiums, with exemptions for low-income families. Middle-income workers are likely to feel the bite of the premium tax the most. "They are already in competition with other countries for wages, and this could be a problem," says Jim Kessler, senior vice president for policy and co-founder of Third Way, a centrist think tank.
4. More progressive income taxes
To raise revenue for the plan, Sanders would increase the top tax rate for those who earn between $500,000 and $2 million to 43 percent, up from the current top rate of 39.6 percent. Rates would rise to a top level of 52 percent for those earning income of $10 million or more.
5. Capital gains and estate tax changes
An additional source of funding would come from increasing the rate on capital gains, which is currently around 15 percent. Rates would go up by an unspecified amount for those making more than $250,000 annually. The richest Americans would pay a progressive tax on estates valued at more than $3.5 million, rather than the current 40 percent rate.