Giving Health Care Reform a Shot in the Arm

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By FERNANDO TORRES-GIL, GILBERT VASQUEZ and JORGE C. CORRALEJO

President Obama, to his credit, has recently recognized that no presently discussed health care plan, including Sen. Ted Kennedy’s comprehensive plan, may help small businesses and the millions of Americans they employ. Equally important, the president has reversed himself and will no longer leave the details of a health plan that could harm small businesses to Congress. Instead, the president will take a hands-on role.

Small businesses are the engines of economic growth; this is particularly the case in Southern California. For many of these businesses, full and effective family health care coverage could cost as much as $12,000 per employee per year, or $120,000 for a business with 10 workers.

For most small businesses, a cost of up to $12,000 per worker is the difference between making a profit or suffering a major loss. To present it more starkly, a small business of 10 could expand by 30 percent to 50 percent and add three to five additional workers if it didn’t have the burden of heavy health care costs. Let us not forget that excessive health care costs helped bring down General Motors.

Our question is, Isn’t the job growth that small businesses could create, if they did not have the primary burden for health care, exactly what President Obama hoped for through this economic stimulus plan intended to create or retain 3.5 million jobs? And, isn’t job creation a key to producing the tax revenues necessary to pay for health care reform?

Small businesses in Southern California, including 500,000 Latino-owned businesses, don’t want to abandon health insurance, but the present math just doesn’t add up. This is why the Wall Street Journal on May 26 reported that 10 percent of small businesses are likely to eliminate coverage this year. It is also why, according to the Journal, only 38 percent of small businesses had any coverage as of 2009.


Solving the problem

How can Obama, a strong proponent of entrepreneurs, solve this problem? Cutting costs by 10 percent, the maximum promised, even if all health care providers cooperate, is not sufficient.

To solve this problem, the president may have to go outside the box. This may require small businesses in different industries and perhaps, in different regions, to develop minimum health care plans. To be successful, these plans must have the support of the vast majority of both small businesses and their workers.

While awaiting the president’s program, we are calling on major foundations to help examine and fund a pilot program of up to 1,000 small businesses in Southern California. The heart of our pilot program would be combined sacrifices from four key parties: small business employers; employees; health care providers; and the federal government, and once states are prosperous, state governments.

Once this pilot program has commenced and to maximize our success, we will personally ask Obama to visit for himself this major hub of small and minority business activity. This would likely become a key foundation by small business into the development of a successful path to this perplexing problem.


Fernando Torres-Gil, Ph.D., is the associate dean of the School of Public Policy at UCLA and is a founding board member of the Latino Business Chamber of Greater Los Angeles. Gilbert Vasquez, CPA, has been the managing partner of Vasquez & Co. LLC for 40 years. He is the vice chairman of the Latino Business Chamber. Jorge Corralejo has been a business owner for 25 years in downtown Los Angeles, and is the chairman and chief executive of the Latino Business Chamber.

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