Prescription for Pennsylvania ~ Rendell’s Proposed Payroll Tax
How will this proposal IMPACT YOUR BOTTOM LINE?

It is no secret that Pennsylvania’s economy is taking a pounding from the ever-soaring costs of health-care premiums. An alarming percent of businesses that offer health-care benefits to employees have been enduring exponential annual increases in premiums for the past several years.

The Governor’s solution to the Commonwealth’s crisis is a plan he calls Prescription for Pennsylvania; a health-care plan that could be detrimental to businesses in Pennsylvania, specifically small businesses. As currently written, Rendell’s plan proposes to provide health-care coverage for all Pennsylvanians by implementing a three percent payroll tax on all Commonwealth employers. Employers providing health care for employees would be required to meet an undefined set of requirements to determine eligibility for the receipt of a credit for providing that health care. The real hardship would fall on small businesses like our independent car washes already unable to afford health insurance coverage for their employees, as the end result of the proposed three percent payroll tax would essentially be an inflated Personal Income Tax rate.

Further the three percent proposal is just that, and it is likely this percentage would increase annually. In fact, financial experts are already projecting a .5 percent increase in the out years of the plan. Members should be especially concerned as according to numerous financial analysts, the plan relies heavily on built-in revenue assumptions and declining revenue sources, and underestimates the cost of providing benefits to enrollees in a state program. Specifically the plan claims to be able to provide the proposed comprehensive benefits package for less than $300. This has raised red flags among industry experts as being unrealistic at - best especially considering that Rendell’s plan mandates the inclusion of prescription drugs and behavioral health services; two of the most costly benefits in health-care plans.

This proposal renders no incentive to employers to keep their private health-care plans. Further, those employers struggling with rising health-care costs would most likely opt to pay the three percent payroll tax as it would be more cost-effective. Ultimately this would result in an unanticipated enrollment surge into the proposed state program. Finally, the last blow to businesses with this plan comes when they pay the three percent tax for an employee who opts not to participate as Rendell’s plan does not require employees to obtain coverage.

The retail and service industry is already in a slump and the minimum wage implementation simply added another blow. We can all agree that a more cost-effective system for quality and affordable health care is needed however the burden should not be placed squarely on the shoulders of Pennsylvania businesses. Government’s roll must be one that fosters and promotes greater competition among private health-care providers, controls and eliminates unnecessary mandates and squelches lawsuit abuse.