Will single payer health care help or hurt businesses?

by Rob Roper

Gov. Peter Shumlin

Peter Shumlin stated categorically, “The most important part of this plan, in my judgment, is that we can remove the burden of heath insurance from employers…. We have 70,000 small businesses in Vermont. If we could take the burden of health insurance off of them and share it as a state and have a system that actually reduces costs, that’s a huge jobs creator.” (Mark Johnson Show 1/21/11)

While many might agree with Shumlin’s argument, the question is does the plan recommended by Dr. William Hsiao, with its reliance on a 12% to 13% payroll tax on employers, actually do that.

Betsy Bishop, president of the Vermont Chamber of Commerce, doesn’t think so. “If all we’re doing is switching the burden from a [health insurance] premium to a payroll tax, that doesn’t lift the burden. In fact, it would leave businesses with less flexibility than they have now. Now business can decide how much they’re going to pay or are able to pay for health insurance. They would loose the ability to make those decisions themselves. Government would mandate those costs.”

Shumlin echoed this analysis, but not the concern on WDEV’s Mark Johnson Show. “I would argue we use a payroll tax right now. The only question is it’s a discretionary payroll tax…The unfairness in the current system is that it’s the choice of the employer.” In other words, we’re not changing where the money comes from, just who decides how and how much you pay – and it’s not you.

In addition to the loss of control over their health care costs, businesses would face the added pressure of legal penalties if they failed to meet their tax obligations, which can be severe. Unpaid withholding tax is assessed a penalty of 5% per month. A concurrent interest charge is assessed and for 2011 it is an annual rate of 4.8% or .4% per month.

If a single payer system were adopted, the political pressure by health care users and advocates to increase benefits, and therefore tax rates, will be considerable. Dr. Hsiao recognized this problem in his presentation to the legislature, recommending that an independent board “representing all the major payers, including, employers, state government and consumers, as well as the beneficiaries or recipients of benefits and payments, including providers and consumer groups” be formed to administer the system. “The major role of the Independent Board will be to negotiate updates to the benefit packages and payment rates to providers.”

It’s easy to see how in Vermont those who would advocate for higher taxes to pay for more generous benefits would come to constitute a majority of any such board. And while the creation of the board is supposed to mitigate the politics surrounding health care decisions, who gets appointed to these types boards is, of course, a highly political. (Recall the appointment of NRG Systems’ David Blittersdorf by Peter Shumlin to the board of the Clean Energy Development Fund).

Governor Shumlin recognizes that the business community is “willing to go along with this as long as [we] promise that this is about cost containment. Which it is.”

Or is it?