How Insurance Works

President Obama Explains Why Health Insurance Reform is Crucial for Small Business


The President:
Good afternoon, everybody. Please, have a seat. Before I begin, I want to just
acknowledge two people who are working extraordinarily hard
on behalf of small businesses. First of all, the administrator
of our Small Business Administration,
Karen Mills, is here. (applause) The other individual who is on
his way and will be here in a hot second but we didn’t want to
keep everybody waiting is a dear friend of mine, a great
former governor of Virginia, is now the senator from the
great state of Virginia, and a huge supporter of small
business and trying to figure out how to help all of
you control your costs, and that’s Senator Mark Warner. So when he comes in,
please give him a smile. (applause) I asked you here today to talk
about health insurance reform and why it’s so critical to
the success of small businesses across our country. But before I do, let me talk a
minute just briefly about the new economic numbers that
were released this morning. I am gratified that our economy
grew in the third quarter of this year. We’ve come a long way since
the first three months of 2009, when our economy shrunk
by an alarming 6.4%. In fact, the 3.5% growth in the
third quarter is the largest three-month gain we
have seen in two years. This is obviously welcome news
and an affirmation that this recession is abating and the
steps we’ve taken have made a difference. But I also know that we got a
long way to go to fully restore our economy and recover from
what’s been the longest and deepest downturn since
the Great Depression. And while this report today
represents real progress, the benchmark I use to measure
the strength of our economy is not just whether
our GDP is growing, but whether we’re creating jobs,
whether families are having an easier time paying their bills,
whether our businesses are hiring and doing well. And that’s what I’m here to
talk with you about today. I know many of you have come
from different corners of our country to be here, and looking
out at all of you I’m reminded of the extraordinary diversity
of America’s small businesses. You’re owners of coffee
shops, and diners, and hotels. You’re florists,
exterminators, builders. Each of your shops and firms
reflects different passions, and different ideas,
and different skills. But what you share is a
willingness to pursue those passions, take a
chance on those ideas, and make the most
of those skills. What you share is an
entrepreneurial spirit, a tireless work ethic, and a
simple hope for something better that lies at the heart
of the American ideal. Businesses like yours are
the engines of job growth in America. Over the past decade and a half,
America’s small businesses have created 65% of all new
jobs in this country. And more than half of all
Americans working in the private sector are either employed by
a small business or own one. Now, even in good times,
starting a business, as all of you know, is not easy. It takes moxie, it takes
gumption, it takes ingenuity, and failure is often
more likely than success. But I don’t have to tell you
that it’s been particularly difficult over the
past few years. From the middle of 2007
through the end of 2008, small businesses lost
2.4 million jobs. Thousands have shut
their doors altogether. And because of
the credit crunch, banks have shrunk
back from lending, making it harder to get
loans to branch out, or finance your inventories,
or maybe even to make payroll. Maybe you’ve had
to forgo raises. Maybe you’ve had to do the
unthinkable and lay off friends or family. So we know how tough times
have been for small businesses. That’s why I made sure the
Recovery Act included a number of measures to help small
businesses weather this economic storm. We’ve put a tax cut — a
tax cut, not a tax hike — a tax cut into the pockets
of the vast majority of small business owners and employees. We’ve supported nearly 65,000
[sic] loans to small businesses — more than $13
billion in new lending. More than 1,200 banks and credit
unions that had stopped issuing SBA loans when the financial
crisis hit are lending again today. And just last week, we proposed
increasing the cap on what are called 7(a) and 504 loans
— some of the loans most frequently handed
out by the SBA. But given the enormous problems
small businesses and all Americans are facing today,
we’re aware that these steps are by no means enough. If we’re serious about
strengthening small businesses, if we’re serious about
creating a climate where our entrepreneurs can succeed, if
we’re serious about giving you the chance to prosper
and grow, I believe, this administration
firmly believes, that we need to pass health
insurance reform in the United States of America. Now, few have a bigger stake in
what happens than all of you. Few have a bigger stake than the
men and women who own a small business, work at
a small business, or rely on someone who does. Few have a bigger stake in
what happens because few are struggling more
under the status quo. You all know the story. We all know that family premiums
have skyrocketed more than 130% over the past decade. They have more than doubled. But small businesses have
been hit harder than most. A story in the paper just the
other day said that many small businesses may see their
premiums rise about 15% over the coming year — twice the
rate they rose last year. And in part because small
businesses pay higher administrative costs
than larger ones, your employees pay up to 18%
more in premiums for the very same health insurance. In one national survey,
nearly three-quarters of small businesses that don’t offer
benefits cited high premiums as the reason — and
that’s not surprising. The bottom line is that too many
Americans like you can’t afford to build the kinds of businesses
you’d been hoping to build. Too many budding entrepreneurs
can’t afford to take a gamble on a smart idea because they can’t
give up the health insurance they get in their current job. Too many of you not only
can’t afford to provide health insurance to your employees, too
many of you are having a tough time just affording health
insurance for yourselves. That’s bad for our economy,
it’s bad for our country, and that’s what we’ll change
when health insurance reform becomes law. Just this morning, the House
of Representatives released its version of health
reform legislation, and I want to commend Nancy
Pelosi and the Democratic Caucus for their leadership in
achieving this critical milestone. They forged a strong consensus
that represents a historic step forward. This bill includes reforms that
will finally help make quality insurance affordable. Importantly, this bill is also
fully paid for and will reduce the deficit in the long term. Now, there is no doubt
that this legislation, and the legislation that’s
being drafted in the Senate, would benefit millions
of small businesses. It’s being written with the
interests of Americans like you and your employees in mind. And yet, there are those who
have a vested interest in the status quo who are
claiming otherwise, and they’re using misleading
figures and disingenuous arguments. So I want to try to explain as
clearly as I can exactly what health reform would mean for
small business owners like you and the workers you employ. The first thing I want to make
clear is that if you are happy with the insurance plan
that you have right now, if the costs you’re paying and
the benefits you’re getting are what you want them to be, then
you can keep offering that same plan. Nobody will make you change it. What we will do is make the
coverage that you’re currently providing more affordable by
offering a tax credit to small businesses that are trying to
do the right thing and provide coverage for their employees. Under the House
and Senate bills, millions of small businesses
would be eligible for a tax credit of up to 50%
of their premiums. That’s in the legislation
that’s already been proposed. We’ll also make your coverage
more stable and more secure. Right now, if just one of your
workers falls seriously ill, it could spell disaster
for your entire business. You could see your premiums
shoot up and you face a painful choice: Do you eat the costs and
ask your workers to contribute more? Do you seek another
insurance plan, without any guarantee that
you’ll be able to find one that’s affordable? Or do you just scale back
benefits or drop coverage altogether? I don’t think that you should
have to make that choice in the United States of America. Under health insurance reform,
we put an end to the days when an insurance company could use
one worker’s illness to justify jacking up premiums
for everybody. We’ll crack down on excessive
overhead charges by setting strong standards on how much
of your premium can go towards administrative costs and
requiring insurers to give you a refund if they violate
those standards. It’ll be against the law for
insurance companies to deny you coverage because of a
preexisting condition. And it will be against the law
for insurance companies to drop your coverage when you get sick
or water it down when you need it the most. They’ll no longer be able to
place some arbitrary cap on the amount of coverage you can
receive in a given year or a lifetime. If you get your insurance
through your employer, we’ll change the cutoff on how
old your kids can be to remain on your plan — we’ll
raise that to 26 years old. We’ll place a limit on how
much you can be charged for out-of-pocket expenses. And insurance companies
will be required to cover, with no extra charge, routine
checkups and preventive care, like mammograms and
colonoscopies — because there’s no reason we
shouldn’t be catching diseases like breast cancer and colon
cancer before they get worse and cost more money. That makes sense, it saves
money, and it saves lives. So that’s what we’ll do for all
the small businesses that have insurance, that are currently
providing insurance. And for all the small businesses
that can’t afford to provide insurance right now, and small
business owners who can’t even afford to get
coverage themselves, we’ll finally make quality
coverage affordable. And here’s how we’ll do it. One of the biggest problems in
our health care system right now is if you’re a small
business owner or if you’re self-employed, you often have
such a small number of workers that insurance companies aren’t
all that interested in your business. It’s basic economics. You don’t have a lot of
leverage as a small customer. And as a result, you end up
paying higher costs than big businesses that can get better
deals because they’ve got more workers — they got
more purchasing power. So what we’ll do is to set up
what we’re calling an exchange that will pool small
businesses together. And that will mean it’s not just
you bargaining with insurance companies, it’s you and many
other small business owners and self-employed individuals
all across the country. And with all that
additional leverage, you’ll be able to get better
deals than you could have ever received on your own. In fact, small businesses that
choose one of the plans in this exchange could save 25% on
their premiums by 2016 — only two years after the
exchange has been set up. And we’ll also offer tax credits
to make insurance even more affordable for millions
of small businesses. So meanwhile, by expanding
coverage for more Americans, we’re going to help eliminate
the “hidden tax” of more than a thousand dollars that the
average worker is paying to cover the medical
expenses of the uninsured. Now, nothing is free, and it’s
true that when reform becomes law, businesses of a certain
size who do not offer their workers health care coverage may
be required to contribute to the costs — and that makes a lot of small business owners nervous. Opponents of reform have tried
to say that you’d be subject to this penalty and it could
potentially drive up your costs. But here are the facts,
because this has been analyzed repeatedly. About 90% — 90% of
all small businesses, regardless of what version of this plan you’re talking about that’s currently going
through Congress — 90% of all businesses would be
exempt from this requirement. So if your business is anything
like the vast majority of small businesses out there, this
requirement simply won’t apply to you — because I don’t think it’s fair to impose a penalty on small businesses that are already operating at very narrow margins. So that’s what health insurance
reform would mean for you and for all our small businesses. It would reduce your costs. It would prevent small business
owners from facing exorbitant rate hikes. It will make coverage affordable
for all small businesses that can’t afford it right now. And if you’re providing health
insurance to your employees, it gives you more
predictability, more security, more stability. It will help remove the worry
that if you have the courage to strike out on your own
and open a business, you’ll be doomed from the start. It will help give entrepreneurs
and all Americans the assurance of knowing they won’t go
broke when they get sick. It will help ensure that no
small business owner in America has to choose between being
a successful employer and an employer who cares deeply about
the well-being of his employees, or her employees. It will help us be the kind of
country we know ourselves to be. So what’s at stake isn’t just
the success of our businesses or the strength of our economy or
even the health of our people. What’s at stake is that
most American of ideas — that this is a place where
you can make it if you try; where you can be your own boss;
where the only limits to what you can achieve are your
smarts, your savvy, your dreams, your willingness to work hard;
where you can pass on to your children a better life
than you inherited. That’s what’s at stake. That’s what we’re fighting for. And I’m absolutely confident
that if we do what has to be done, if we can build an economy
that works for all Americans, if we can promote innovation,
and foster growth, and build a better health care
system that is not a drag on each and every one of you,
then not only will we ease the burden on entrepreneurs, not
only will we give our small businesses a huge boost, not
only will we produce the kind of growth we so desperately
need in this country, but we’ll secure the blessings
of America for our children and our grandchildren. That’s what we’re fighting for. I need your help
to make it happen. Thank you very much, everybody. Thank you. God bless America. (applause) Thank you.


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