Press Briefing by Erskine Bowles, Administrator, Small Business Administration and Andken Thorpe, Deputy Assistant Secretary, Health and Human Services
The Briefing Room
3:55 P.M. EDT
MR. ANDERSON: This will be an on the record briefing featuring Erskine Bowles, Administrator of the Small Business Administration. The topic is health care reform and small business. Mr Bowles will be joined by Ken Thorpe, who is a Deputy Assistant Secretary at the Department of Health and Human Services. And Mr. Bowles will have a short opening statement. After that we will end sound and camera.
Q: Excuse me, why?
MR. ANDERSON: Why?
Q: Mr. Bowles was on the record this morning, why isn't he on the record this afternoon?
MR. ANDERSON: I don't know.
Q: Dee Dee said it would be on the record.
MR. ANDERSON: The briefing is on the record.
Q: Your just fighting for broadcast interest now and we appreciate it.
Q: Well, in that case it's a -- (Laughter.)
MR. ANDERSON: Fair enough. I do apologize for the many delays. As you might imagine this is a scheduling meltdown of historic proportions -- this coming into this week before the President's speech. The problem principally is one of principles and them being torn apart in different directions. Mr. Bowles has just come from a meeting with the members of the Black Caucus. And we do apologize for the delay but we are ready. Erskine Bowles.
ADMINISTRATOR BOWLES: Good afternoon. I think we've had a -- at least for the small business community, an exciting and good day with the President. We had a chance this morning, as you know, for a number of people who had written the President to come visit with him and to read their letters and talk about their concerns about health care.
We also had an opportunity to go to a small business here in the District, and we had small businesses from throughout the country come and visit with the President and talk to him about their concerns and their thoughts about health care and the solution to our health care problems.
I think over and over again we heard small businesses talk about the absolutely skyrocketing increases of health care costs that they are experiencing -- health care costs that are growing by 20 to 50 percent a year. And we also heard these same small businesses talk about the abuses of a current health care system that are focused upon them. And I'm talking about things like exclusions for pre-existing conditions, things that I've experienced with a diabetic child.
Each one of these small businesses talked over and over again about how they had tried to control the cost of health care, how they had tried to do such things as to hold the cost of health care down by switching programs, by going to managed care, by trying self-insurance, by reducing benefits, by passing a bigger cost along to their employees, and how nothing had really helped. That the cost of health care continued to rise and rise rapidly and eat into their profits.
And the President had a chance to listen to them and talk about his plan. And he had a chance to talk to them about the plan he would present and how that plan would offer to them real insurance, rock solid comprehensive insurance, and insurance that they could afford.
He talked about the caps and subsidies that would hold down the cost of health care, and he talked about the mechanisms that would keep the cost of health care from increasing at too rapid a rate.
And he also had a chance to talk to them about something they brought up, which was workers' comp, and how workers' comp was the only item on most of these small businesses' income statement that was increasing at a more rapid rate than health care, and how we would hold that down.
And the last thing we talked about was offering 100 percent deduction for the self-employed instead of 25 percent that they have now to put them on a level playing field.
I think we had a good day. We had a large group of small businesses there representing lots of different markets, and I think we all had a chance to learn something. I know the President felt he benefitted from it greatly. Thank you, I'll take your questions.
Q: Mr. Bowles, some of the small business owners there with more than 50 employees said that under the President's plan, their costs would go up -- double or triple what they are now. Some of them said they are now paying, in the case of Daryl Routzahn, only 2.9 percent of payroll. One other business owner said he talked to President Clinton after the formal session and he indicated some interest in looking into, or changing that 50 employee cut-off so that businesses -- small and mid-size businesses with more than 50 employees -- might also get some government subsidy. Is that under consideration now? Has that changed? Will businesses with 50 or more employees get a government subsidy?
ADMINISTRATOR BOWLES: Clearly, I can't say whether or not that will change. What -- I do think it's a mischaracterization to say a number of the small businesses would experience increased costs. I think a few of them will. But clearly, the vast majority would experience not only lower costs, but the availability to have real insurance coverage -- comprehensive, rock solid coverage.
Let me give you an example, okay? One of the people that was there today, Marilyn Hart of Design Plastics in Fort Worth, Texas -- today Ms. Hart, who has 65 employees so she doesn't fall under the less than 50 cap -- she pays $166,000 a year for coverage. That's for 100 percent of her employees. Okay, that's 15.4 percent of payroll. Under the plan, she would only have to pay about $85,000, which is a savings of almost 50 percent. And the coverage she would be able to offer her employees would be better.
Now, if she chooses to cover not only the employer portion, but the employee portion too, she would still save 25 percent. So she's going to be far better off, and her employees are going to be far better off. And she's going to save money, and that will enable her to go out and hire more people.
Q: If I could follow on Gene's question. When the President said that this was one of the things that he was most concerned about -- this 50 employee cut-off -- what was he talking about? What is he prepared to do to relieve that burden?
ADMINISTRATOR BOWLES: Well, as you well know, this President is focused on small business. And he has spent -- I can't tell you the countless hours -- making sure that we put together a health care plan that would help small business, that would be good for small business, that would hold down the costs for small businesses.
Now the cap is at 50 today, and it is probably one of the things that the President would like us to take a look at. But we are going -- you know, today for companies with less than 50 employees, clearly the vast majority of them -- if you call them up and ask them, just ask them -- you know, how are you going to be under this new plan? -- they'll tell you that we're going to have better coverage at a lower rate.
Q: Do your surveys specifically quantify how many people who have employed between 50 and 100 would be affected adversely by this?
ADMINISTRATOR BOWLES: I don't know. I can tell you that I did read Ms. Staddler's article the other day, and she quoted five small businesses, and four out of those five would have reduced costs.
Q: But you've done extensive surveys. You don't have any numbers that can tell us? When you say a vast majority would get lower cost, you don't know how many would get --
ADMINISTRATOR BOWLES: I just can't give you an exact percentage, I just don't know. I'm sorry.
Q: The other side that NFIB and other people are saying is that not only might people have some increased cost, say in the 50 to 100 employee range, but some there will be substantial job loss. I know you all are starting to look at the question of what the job loss will be like. What types of small businesses are likely to not only have increased cost, but suffer job loss? What conditions --
ADMINISTRATOR BOWLES: Again, I think the vast majority of all small businesses will have lower costs. And therefore, with lower costs, they will clearly, clearly be able to go out and hire more employees.
Q: But you know a lot about small business. What's the profile of --
ADMINISTRATOR BOWLES: I spent my entire career in small business -- (Laughter.)
Q: Right. So what's the profile of a small business person who would be imperiled not with only increased costs, but maybe having to cut jobs or shut down.
ADMINISTRATOR BOWLES: Let me give you some statistics, okay, so you can live with this. National Small Business United came out today -- or just last week -- and they said the average small business that doesn't supply health care to their employees has an average payroll of about $7,400. Well, you know what it's going to cost that small business that doesn't provide health care to provide health care to its employees? Less than a dollar a day.
They also said for the average small business that provides health care coverage to their employees, the average payroll is about $15,600. It's going to cost that small business less than two dollars a day. And I dare say, that's going to be a significant savings for that small business, and they are going to be able to take those dollars and go out and hire new people and buy -- and --go out and make new capital expenditures that will create jobs.
Q: Could you answer the question please?
Q: The President said today -- he conceded today, I believe for the first time, that there would be some gross job loss. That overall, if the current system stays in place, there will be more job loss. And that if your system passes, he says, there will be reduced job loss. But he did concede that there would be some job loss --
ADMINISTRATOR BOWLES: Every single company, you know, won't win. That's impossible, okay? But the vast majority will. And that's what I'm trying to drive home to you.
Q: Do you think it's important for people to know which types of businesses the conditions that will exist, where they will have job loss?
ADMINISTRATOR BOWLES: I think what I have just told you is I believe that the vast majority of all small businesses will be able to offer their employees comprehensive, rock-solid, real insurance. Not some insurance that's going to be jerked away two years from now. Or not some insurance where the rate is going to skyrocket a year from now. Or not some kind of insurance where you're subjected to pre-existing conditions exclusions. But real insurance, and insurance at a lower rate.
I think what we have asked small businesses to do is to call a 1-800 number to the SBA, give us your numbers, okay, and we'll tell you exactly whether you are going to have increased costs or decreased costs. And we believe that the vast majority will find out the costs will go down.
Q: Have you given out an 800 number?
ADMINISTRATOR BOWLES: No, but we will.
Q: Mr. Bowles, what I want to follow up on is you're saying the vast majority will have lower costs. As you well know, the vast majority of small businesses, when you get to businesses that have five or fewer employees or very few employees, that is the vast majority. But when you get to this segment that has more employees, you are getting to more substantial businesses that are more the engine of the economy -- the small businesses that are really contributing more to the economy and --
ADMINISTRATOR BOWLES: -- the way their health care costs are increasing, the health care is going to end up being the salary and your cash wages are going to be in the fringe benefits the way it's growing.
Q: Indeed. But given that, you said that this group is something the President wants you to look into. Is that something that's going to be done now? Will --
ADMINISTRATOR BOWLES: Oh, we continually -- continue to take the input. The very purpose of having meetings like today is to listen to the small business community, to listen to others that will be affected by the plan, to go and take that information and come back and evaluate it and see how we can improve a plan. I mean, we always are looking for ways to improve a plan, and we'll do that up until the day it goes forward.
Q: What are your projections on the job loss in the insurance industry?
ADMINISTRATOR BOWLES: I don't --
Q: regardless of size?
ADMINISTRATOR BOWLES: I'm sorry. I don't know any numbers on those.
Q: How about the projection of overall job loss in small businesses? I'm not disputing your point that the vast majority may end up saving money --
ADMINISTRATOR BOWLES: I believe that you will see job gains in the small business community. I think the example that I just gave you of Marilyn Hart is a perfect example of the kind of person who is going to have -- be able to go out and hire more people, not less. She's going to save money. She can use that money to hire additional people. She can use that money to go out and make capital expenditures to become more productive. I think she'll be able to have job gain, not job loss.
Q: Do you have figures on gross jobs lost and gross jobs gained?
ADMINISTRATOR BOWLES: I'm sorry, I don't.
Q: Do you have figures on -- you don't have -- there's been no study on this?
ADMINISTRATOR BOWLES: Yes, sir?
Q: What arguments would you make to the NFIB and other groups for employer mandate? If you were sitting down with them now, what --
ADMINISTRATOR BOWLES: What I'm saying is today small business has the worst of all worlds. It can't be any worse. We have every abuse in the system today. The cost shifting that goes on is all shifted right onto the backs of small business. We have a skyrocketing cost increase. You know, those people who can afford to buy insurance -- you know, the costs are going out of the roof. Some people, because the costs are so bad or insurance is just not worth it anymore, you know, can't buy it.
So what I'm saying is this plan addresses the need. You know, NFIB has come out with some statistics that I saw themselves the other day. They did a survey back in -- let me see if I can find it -- that some -- Professor Charles Hall -- Temple did. And in that survey they said -- they found out that 92.4 percent of small business owners agree that the cost of health insurance is a serious business problem. Sixty-nine percent of small business owners agree or strongly agree that every American has a right to basic health insurance. Sixty-four percent of all Americans should -- small businesses agree that all Americans should receive a minimum level of health care, regardless of their ability to pay. And probably the most important one is over 60 percent of small businesses in this NFIB survey felt that the government must play a more direct role in health care to bring the cost under control.
So what I would say -- we are doing exactly that. We are attacking the problems that are compounding on the backs of small businesses. We're going to reduce the cost. We're going to put mechanisms in to control the increase in cost. And we're going to provide rock-solid, comprehensive, real insurance. And I think if you call the members of the NFIB -- individual companies and ask them what it costs today and what it costs under the plan, you'll find that the vast majority will have better coverage at lower cost.
Q: But the reality of the lobbying fight that you're facing on the Hill gives NFIB a lot of weight.
ADMINISTRATOR BOWLES: I'm just trying to get by the rhetoric and get to the facts.
Q: I understand that --
ADMINISTRATOR BOWLES: And the facts are the plan will be really good for small business.
Q: but I'm talking about political reality on Capitol Hill. A lot of people whose jobs depend on support from organizations like the NFIB will obviously be listening to their complaints about the plan. How are you prepared to counter that?
ADMINISTRATOR BOWLES: I'm not worried about politics. I'm here --
Q: You're not?
ADMINISTRATOR BOWLES: -- as a business person. Okay? I spent my entire career in the business sector and the private sector, so I'm here to tell you the truth. And the truth is that I believe that the vast majority of all small businesses will be better off. That's why we're asking small businesses to call us -- tell us what it costs today and what your coverage is today, and we'll tell you what it'll cost tomorrow and what the coverage is tomorrow. And I think you will find out if you go and ask the businesses -- get by the rhetoric, okay? Look at the facts, and the facts will tell you that the vast majority of all small businesses will be better off.
Q: The NFIB apparently made a case, though, with the administration to treat independent contractors the way they are currently treated under tax law. And I'd like to know the rationale behind why the administration decided to change the treatment on up to 10 million business owners?
ADMINISTRATOR BOWLES: I certainly wouldn't give any trade organization credit for that position. I think that's a position that we have and I think it's the right position.
Q: But is wasn't a week ago. A week ago you were treating independent contractors as employees.
ADMINISTRATOR BOWLES: I think clearly, as we go through this process, we are looking at a plan that is still -- you know, the President hasn't even delivered the plan yet. I know you may have a bootleg copy of it. But this is a plan that's still being developed. That is a portion of a plan. It is one of the things we looked at, it's one of the things that's been in the discussion for a long period of time. And a position has been taken, and that position is the one you just said.
Q: Why did you change your position, is what I'm asking.
ADMINISTRATOR BOWLES: I don't know if the position was changed, to tell yo the truth.
Q: Is was in the original ---
ADMINISTRATOR BOWLES: I could say that we've gone through lots of different times of looking at it.
Q: You said you expected some net job gains out of this program in the small business sector. I mean, what do you base it on and how many do you expect?
ADMINISTRATOR BOWLES: Well, all I can do is base it on the ones that I have talked to -- okay? -- in the surveys that I have done myself. And I can tell you that we have called literally hundreds of small businesses, and we have found that the vast majority of those small businesses will have lower costs and be able to offer better coverage.
Q: That's not the question I asked you. The question I asked you -- the question I asked -- Mr. Bowles, the question I asked was how many net job gains you expect from this and on what you based that job gain expectation? Do you have some, Gene?
MR. SPERLING: You know, we've just -- so far there has not been a study that has accurately portrayed our plan. The studies that the NFIB has assume no subsidies. They have no clue as our plan did not look at the lower administrative costs. So there has not -- there has not been a serious study in that regard.
The main point that Erskine is trying to say is if the overall majority of businesses you have are going to see their administrative costs go down, are going to see their -- those who are providing, see their health care costs go down, that is going to lower both their security in hiring more people, and it's going to lower their cost of hiring. And the chances -- for those small businesses, the net gain -- that their job gains will lead to a net job gain is very strong.
But, Gene, you asked about the 50 to 100, but you just asked as if the whole universe of those businesses don't provide health insurance. Those who do provide health insurance are clear winners. Those who provide full coverage are going to see their costs go down -- are going to see their costs go down dramatically. And even if there are some small businesses who see some of their costs go up, I say -- want to suggest there is very little evidence to suggest that that would in any way lead to a job effect. That people might -- that may be their theory, but the studies that have looked at the minimum wage lately have shown there have been far greater minimum wage increases, that there was no employment effect at all. And I think that's been reported by some of your papers. Those were talking about even when New Jersey increased from $4.25 to $5.05, which was an eight -- a substantial increase in cost that did not have any job effect at all.
So the overwhelming thing to keep in mind is most businesses and most small businesses provide health insurance, their costs will go down. Their administrative costs will go down. Their security in hiring more people will go down. So any logic that would lead you to say that some people have higher costs and that will have a job effect, that same logic should mean that there will be job -- there will be job gain. I don't know if there is a conclusive study at this moment on what the effect is. But I will say that anything that's being put out there that's suggesting there is job loss is bogus. And that is pretty generous.
Q: I think we're wondering, Gene, where the President got his information that would lead him to acknowledge that there might be a job loss involved here.
MR. SPERLING: The President said -- he said that's he's not going to tell you that everybody is going to be -- that every single person is going to immediately feel an immediate financial benefit in every single way. But that does not mean that there is not going to be a job gain -- I mean, this is part of an overall economic plan that is designed to bring the deficit down, to bring low interest rates down, to give people security that they can hire workers without having to fear an explosion in health care, or that if one of their workers were to get sick, their health care costs were to go out of control -- this is part of an overall plan that I don't think we have any question is going to be good for the economy and good for job growth.
But overwhelmingly -- and I mean, Erskine's heard this. We've heard this all through the campaign. The fear, the insecurity over health care costs is -- clearly has a deterrent affect on people -- on employers. And I don't know if there is a conclusive study. We have not even put out the final facts of our study. But I do suggest that one should look very, very skeptically to anything that one has heard on the negative side, and that the overwhelming -- that if you provide insurance, your costs are going down and that that will have a positive wage or employment affect. Either your current workers will likely receive a higher wage, or you will have more capacity to hire future workers.
THE PRESS: Thank you.
END4:20 P.M. EDT
William J. Clinton, Press Briefing by Erskine Bowles, Administrator, Small Business Administration and Andken Thorpe, Deputy Assistant Secretary, Health and Human Services Online by Gerhard Peters and John T. Woolley, The American Presidency Project https://www.presidency.ucsb.edu/node/269177