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KYL AND NOVACK: Tossing Obamacare anchor to small business

Coverage exemptions for favored firms mean higher costs for others

- - Thursday, June 7, 2012

When Obamacare passed in 2010, one of its essential elements was the "essential health benefit" (EHB) mandate - in essence, the things Washington politicians thought every American's health care plan must contain. At the time, the law's proponents argued that a standardized basic benefits package for all Americans was not only critical, but a moral imperative. Accordingly, the bill that passed included an entire section specifying what coverage was to be mandatory.

The EHB provision was one of the many reasons we opposed Obamacare's passage two years ago, and it's among the reasons we continue to oppose it now. Indeed, even the law's supporters seem to have seen the error of this specific provision - particularly the enormous burden it would impose on struggling American companies and the economy as a whole. As a result, the law's drafters themselves have granted exemptions to select politically favored industries that will protect those companies from the massive costs of EHB implementation while leaving others to suffer.

So-called "self-funded employers" - mainly large businesses - will never have to comply with the EHB benchmarks when offering health care plans to their employees. The Kaiser Foundation notes that nearly 60 percent of all Americans with private health insurance are covered under one of these plans. By exempting self-insured employers from the EHB requirements, the president's plan throws an economic life preserver to big business but an anchor to small businesses and entrepreneurs.

Because few small businesses are self-insured and thus will not get the benefit of this exemption, it might be expected that they would try to self-insure in order to qualify for special treatment. But the Obama administration recently issued a document that reads like an attempt to block small businesses from obtaining self-funded insurance. This follows on the heels of a February article in Health Affairs by Obamacare supporter Mark A. Hall, who implored the administration to help states "influence small businesses to participate in the regulated market by making it more difficult or costly to obtain stop-loss coverage" (a necessary component of becoming self-insured).

It's hard not to see this as a concerted effort to dump these costs on the shoulders of the smallest businesses - companies already battered hard by the recession - while lifting them from the largest firms. As an issue of fairness, it's not right. But in our view, there is a larger takeaway - namely, that the initial justification for even having the EHB mandate appears to have evaporated.

Indeed, taking all of the exemptions into account, more than 100 million Americans will not be covered by the EHB requirements. Still, massive costs still loom for small businesses and entrepreneurs, constituencies not deemed important enough by the administration for special treatment. But if providing an EHB-mandated standardized benefits package for every American is no longer a "moral imperative," it should not be an imperative at all.

It's time for the Obama administration to work with Congress in a bipartisan effort to eliminate the EHB requirement along with the rest of Obamacare - assuming, that is, the Supreme Court does not overturn Obamacare first for violating the Constitution.

Sen. Jon Kyl is an Arizona Republican. Dr. Eric Novack is an orthopedic surgeon.