Thursday, February 25, 2010

Senator Therese Murray and I agree on something?

Senate President Therese Murray released an opinion piece this week that people can read in newspapers across the commonwealth, including the Cape Cod Times (click here to read it). It deals with improving the business climate in Massachusetts, a necessary precursor to creating new jobs.

She shares an interesting statistic about the size (as measured by number of employees) of businesses in Massachusetts. On average, in 1990, companies employed 16.69 people. In 2007, businesses averaged almost exactly 10 people.

Murray also points out how the high cost of health insurance borne by our small businesses is problematic, saying “This issue tops most lists of greatest concerns for small businesses.”

Let me connect a couple of dots here.

April 12, 2006 was the day the Commonwealth Health Connector was signed into law. July 1, 2007 was the first day of the fiscal year in which the health insurance mandate on businesses was enforced. That mandate requires at least a 1/3 subsidy of employee health insurance coverage by employers.

Which businesses are not subjected to the mandate?

Businesses with a full-time-equivalent (FTE) employee counts of less than eleven.

Is it coincidence that our average business now employs fewer than eleven employees?

Probably as coincidental as Cape Cod sporting many 9,990 square-foot pharmacies. In case you don’t know, the Cape Cod Commission reviews projects involving buildings of 10,000 square feet or more.

By the way, I don’t disagree with having a (really) small business exemption from the mandate, but I did speculate at the time that companies employing a few more than eleven FTEs would shed a few people and companies who had ten employees would simply stop hiring.

There are probably other, more clever, ways that businesses are getting around the rules, such as by creating a separate corporation with a different owner for each store or restaurant opened.

The other huge factor in discouraging business development in Massachusetts is something Murray fails to address altogether. Uncertainty.

Businesses cannot make plans when there is a high level of uncertainty. Even if the business environment is less than optimum, state government can do us all a favor by leaving it alone.

Business people can adapt to and deal with the rules in place (as illustrated by the 10 FTE effect and the Cape’s 9,990 square-foot buildings), but they are reticent to make medium to long range commitments when the state is constantly changing the playing field.

I am completely in favor of improving the business climate in Massachusetts. So, in that sense, Senator Murray and I are on the same page. But where has she been for the past three years while the state has fed its insatiable appetite for more revenue and driven hundreds of businesses out of business or forced them to downsize?

Copyright 2010 Randy Hunt


  1. I believe you're onto something. The first thing to fix is the law so the employer doesn't pick up a liability for the already employed 10 people when he/she adds an additional eleventh employee. (I believe the calculation is done on payroll hours and not a head count.) Said another way when you add your eleventh full time equivalent employee you should be billed for one not eleven employees.

  2. Randy: Funny that Ms. Murray didn’t seem willing or able to connect the State's ever increasing tax burden, declining consumer spending and declining employment figures either. I don’t recall seeing a wall or moat surrounding Beacon Hill but clearly Ms. Murray is out of touch with the folks trying to pay the bills.

  3. Anonymous, your idea makes an assumption that someone/something else is paying for the 10 employees' health insurance besides themselves.

    To offer the eleventh employee company-subsidized health insurance and not the other ten employees would be illegal.

    Currently, the ten employees are responsible for their own health insurance. If they are not on Mass Health, then there isn't anyone picking up the tab for them (assuming, of course, that they're not on spouses' plans).

    So when the eleventh full-time-equivalent employee is hired, a business either has to coverage all of them or pay a fine. Though the fine is less than the insurance subsidy, the company is also on the hook for the cost of an uncovered employee's catastrophic illness. That could amount to hundreds of thousands of dollars very quickly.

    It may sound like I'm arguing against myself by saying that the 10-FTE requirement is hurting job growth then saying your idea won't work. But that's the kind of pickle we've gotten ourselves into by implementing a health insurance mandate without doing anything to reduce costs.

  4. Indeed you are arguing against yourself. At least the income tax is bracketed so as income increases the "penalty" gradually increases rather than going over a cliff as the health connector has the small businessman doing at number 11.

  5. Anonymous, let's simplify the discussion then by answering this question: Who is going to pay for the initial 10 FTE employees when a business hires the 11th?

  6. So Randy "to offer the eleventh employee company-subsidized health insurance and not the other ten employees would be illegal." but you'll agree I can lease the 11th employee from Manpower and pay no fine?

    Either I don't understand the law or I'm not making myself clear.

    As I understand it, a business can either provide its employees with subsidized health insurance or failing to do so, will pay a flat fine per employee. If it has 10 or fewer FTE employees it pays no fine. If it has say, 25 FTE employees, it pays a fine on all 25 employees.

    I'm suggesting the fine in the latter case be based on 15 employees and exempt from fining the first 10 hired. What am I missing?


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