Small businesses still need loans

The South Carolina Small Business Chamber was a strong and vocal supporter of last year’s Small Business Jobs Act. I spoke at a press conference at the Capital along with several U.S. Senators to state our support and that of the American Sustainable Business Council for the legislation.

A key component of the effort was the establishment of a $30 billion lending fund to encourage community banks to make small business loans. Of course, just like Small Business Administration (SBA) loans, this program can only make issuing the loans more attractive. The SBA does this through federal guarantees and the lending fund does it through low interest rates.

The success of this new program is totally in the hands of the private lenders. Financial institutions cannot be forced to make the loans.

Today was the deadline for community banks to request to participate in the new lending fund. The Wall Street Journal reports that only 7% of the nation’s 7,700 community banks eligible for the loan program (because they have less than $10 billion in assets) have indicated that they want to participate. The Treasury Department has now extended the deadline to May 16th.

The reason given by some banks is that there is little loan demand from small businesses. That’s simply not true. The demand is there. I hear all the time that a small business owner, even with assets, can’t get a loan.

The truth is this. All financial institutions (with the encouragement of federal regulators) have raised the bar for qualified borrowers. Many of them are sitting on large vaults of money but are afraid to make small business loans that are now perceived as risky.

One solution to this dilemma is allowing the SBA to bypass the financial institutions and start making loans directly to small businesses. We’re now doing this with Stafford and other student loans from the federal government that use to go through private lenders. And I understand that the SBA actually does make business loans on its own in some cases.

The SBA direct small business loans idea has been discussed before but always quickly shot down. But if all the government incentives in the world won’t get the financial institutions to start lending to small businesses, then maybe it’s time to jump start the free market and our economy by putting Uncle Sam in the game.

Federal health insurance exchange for SC

Tea Party saber rattling is making S.C. House Republicans jump ship on supporting legislation (H.3738) creating a health insurance exchange in our state. The Tea Party calls in “Obamacare” because an exchange in each state is part of the Affordable Care Act (ACA).

The ideal exchange would be an online, transparent, competitive, consumer-friendly marketplace where individuals and employees of small businesses can shop for high-value health insurance and receive premium subsidies starting in 2014.

The ACA requires the state to set up the exchange or the federal government will do it for the state. A viable exchange was also one of the requirements the Obama administration laid down for a state to have in order to be even considered for opting out of the ACA requirements.

So if the Tea Party wants South Carolina out from under the ACA, why are they making House Republicans withdraw support for a legislative vehicle to create a state exchange that must pass the House this year in order for there to be any chance of the Senate passing some amended version of it next year? (More on this later.)

The answer can be found in an e-mail sent to Tea Party faithful in the last few days by Talbert Black, Interim State Coordinator of the Campaign for Liberty.

Our legislators have been deceived into thinking that we must have H3738 in place to avoid the federal government setting up the exchange for SC but this is NOT true, the guidelines for setting up an exchange are so arbitrary that if it is necessary we have years to do so, it does not need to be and should NOT be implemented now.

In the spirit of full disclosure, Talbert has been on my radio show several times. I like him (except for the awful, bright orange shirts he customarily wears) and he is passionate about Tea Party issues, some I even agree with. Unfortunately, Talbert has been given some very bad advice.

The ACA is very specific about the January 1, 2014 deadline for an exchange, either state or federal, to be in operation. But the timeline needed to have an exchange fully operational by 2014 starts well before that. This will be a very complicated, slow process. It will take a year at least to get done. Come January of 2013 if South Carolina is not well on its way in creating an exchange, it and all the other state’s like it will be included in a federal exchange.

So that means that the Legislature (or Governor Haley if she thinks she can set up an exchange within the Department of Insurance without legislation) will need to act in 2012. But the Legislature adjourns in June so all it has is the last two months of this year’s shortened session and the first 5 months of next year. Experienced strategists very familiar with our political and legislative process believe that there is almost no chance that we can wait until next year to move controversial legislation out of the House Ways and Means Committee, the full House, Senate Finance Subcommittee, Senate Finance and the full Senate by June of 2012.

We don’t have “years” to set up an exchange. We have months.

Proponents of H.3738 have already agreed to amend the bill to delete certain contentious sections that can be filled in next year after the Governor’s Exchange Planning Committee completes its work. But at least the legislative vehicle can move forward giving the General Assembly the chance to create the exchange.

Otherwise, Governor Haley can try to do it on her own and take the political Tea Party heat (and most likely a court challenge).

Say hello to a federal health insurance exchange for South Carolina. That’s where we’re heading. We actually might be better off.

Health insurance tax credits threatened

The opponents of health care reform are at it again. U.S. House Republicans saw their first general effort to repeal the Affordable Care Act (ACA), H.R. 2, go down in flames in the Senate. So now they are attacking a specific part of the ACA trying to undermine a popular benefit.

This week a House Subcommittee will take up H.R. 3, a bill set for priority by the Republican majority. They’re afraid that after many small businesses get sizeable tax credits for offering health insurance to their employees this year, more small business owners will realize the ACA was a good thing after all. So opponents are trying to make sure this doesn’t happen again in 2012, an election year.

The strategy is to take away the tax credits from small businesses or make the small businesses expend time, effort and, most likely, more money to keep the tax credits. Faced with more government intrusion and regulations, they hope to turn the tax credits into a liability for those who supported the ACA.

To do this they’re hiding behind the lofty goal of reducing the number of abortions. If the health insurance plan of a small business covers even one abortion related service (and most do), it would not qualify for the tax credits under H.R. 3.

Below is my letter to the Subcommittee and Committee that will take up H.R. 3. Feel free to share your thoughts with them also.

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March 28, 2011

The Honorable Dave Camp, Chairman
Committee on Ways and Means
341 Cannon House Office Building
Washington, DC 20515

The Honorable Sander Levin, Ranking Member
Committee on Ways and Means
236 Longworth House Office Building
Washington, DC 20515

The Honorable Pat Tiberi, Chairman
Subcommittee on Select Revenue Measures
113 Cannon House Office Building
Washington, DC 20515

The Honorable Richard E. Neal, Ranking Member
Subcommittee on Select Revenue Measures
2208 Rayburn House Office Building
Washington, DC 20515

Re: H.R.3

Dear Chairman Camp, Chairman Tiberi, Ranking Member Levin and Ranking Member Neal,

After decades of escalating group health insurance premiums and demands for Congressional action for relief, one year ago our smallest of businesses finally were given the opportunity for federal health insurance tax credits. Now H.R 3 threatens to erase this benefit for small businesses because it would eliminate the health insurance tax credits for any existing or new plans that provide coverage for abortion.

The problems H.R. 3 would cause for small businesses that are trying to do the right thing and offer health insurance have nothing to do with the ideological intent of this bill. Even if a small business owner were to agree with the intent, the cost in time, money and continuity of policy is very significant.

1. Small business owners do not have the expertise to closely examine healthcare plans to determine if abortion coverage is included. Such services are not labeled “abortion” but rather fall into numerous clauses in a health care policy from prescription drugs to outpatient surgery to maternity care that includes unforeseen complications. Small business owners are no more prepared to completely understand the fine print of their health insurance policies than are members of Congress.

2. Requiring a small business owner to try to understand the intricacies of their health insurance policies would require considerable time on their own or with an insurance agent (who also probably has no idea how to interpret the verbiage in the policy as it relates to abortion). Essentially H.R. 3 will cause a small employer to divert time from running the business. And if time is money, as we are all told, then H.R. 3 will be an increase in cost for small businesses offering health insurance.

3. Small businesses that finally determine that their health insurance policy does in fact cover even one abortion service will be financially punished in one of two ways. Either they can keep their present policy and lose thousands of dollars in hard won tax credits or they will give up their current health plan and most likely have to pay higher premiums for a new plan. The latter will result from both re-underwriting by a new carrier and adding provisions now required in any new policy. This is especially true since the health insurance exchanges will not be in place until 2014 to increase competition for this business.

H.R. 3 is simply a slap in the face to the millions of small businesses now offering health insurance to employees and eligible for the new tax credits. Targeting small businesses for such punitive action, while ignoring big businesses that also receive tax benefits when offering health insurance, demonstrates a callous disregard for the “backbone of our economy,” as members of Congress love to proclaim about small businesses.

Sincerely,

Frank Knapp, Jr.
President & CEO
The South Carolina Small Business Chamber of Commerce

Invitation and opinion editorial

Below is another opinion editorial of mine on the first anniversary of the Affordable Care Act that ran in some online publications.

But first an announcement.

As I have talked about before, the S.C. Department of Insurance (DOI) has received several planning grants to prepare for implementing programs under the Affordable Care Act. The DOI has now hired Keith Rodgers as the Project Manager for the Premium Rate Review Grant and Gary Thibault as the Project Manager for the Health Insurance Exchange Planning Grant.

These efforts are essential elements for South Carolina to effectively make health insurance more affordable.

The DOI is giving anyone interested in meeting Keith and Gary the opportunity tomorrow, Friday March 25th, at an informal drop-in from 9:30 to 10:30 in the lower level of the Capitol Center, 1201 Main Street in Columbia.

If you have questions, contact Kendall Buchanan (737-6124 or kbuchanan@doi.sc.gov) or Cathy Cauthen (737-6188 or ccauthen@doi.sc.gov).
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The following opinion editorial by Frank Knapp ran in The Augusta Free Press and the DL-Online (Minnesota)

Mar 23, 2011

What happened to gloomy predictions?

Frank Knapp, Jr

Economic reports show that most job growth in our country this year has come from small- and medium-size businesses. That trend will only accelerate, according to the recently released Small Business Index from the Center for Excellence in Service at the University of Maryland’s Robert H. Smith School of Business.

Nearly 3.8 million new jobs will be created by small businesses with fewer than 100 employees in 2011, says the report. That will be enough alone to lower the U.S. unemployment rate by 2.4 percent. The survey, conducted in January, also found that only 2 percent of small businesses planned to lay off workers.

Major health insurance companies nationwide are reporting dramatic increases in small businesses offering health insurance to employees. This reverses a trend for small businesses dropping insurance because of affordability.

This is not what opponents of health-care reform told us would happen if Congress passed the Affordable Care Act (ACA). They warned us strenuously before the ACA became law March 23 of last year that small businesses would not only stop hiring out of fear of the future but would begin laying off workers because of anticipated new taxes, fees and health-insurance mandates under the ACA. Small businesses also were supposed to start dropping health insurance because the ACA would drive up premiums. These dire predictions continued right up until last year’s November elections.

Fortunately, the gloom and doomers were wrong. Those of us who supported the ACA have tried valiantly to put out more realistic predictions about how the ACA was going to help small businesses. There will not be new taxes, fees or health-insurance mandates for small businesses with 50 or fewer employees (approximately 96 percent of all businesses). However, most of the mainstream media preferred to report on the negative tea-reading.

But now the good news for small business is rolling in and the positive future effect of the now 1-year-old ACA is becoming clear.

More than 4 million U.S. small businesses with fewer than 25 employees are eligible to receive health-insurance tax credits under the ACA. That’s 87.3 percent of all small businesses in the country that the ACA can help by making health insurance more affordable.

As for the ACA dramatically increasing the cost of health insurance, a senior vice president at Harvard Pilgrim says that the federal law has only increased premiums by 1 percent.

The ACA is helping small-business owners who have been locked out of health insurance because of their own pre-existing condition. Right now, these entrepreneurs are eligible for affordable coverage from new high-risk pools established under the ACA.

This year, the ACA is requiring that at least 80 percent of every premium dollar being paid in small group health insurance plans is actually paying for medical costs — not marketing, CEO salaries or profit. If not, the policyholder is owed a refund.

These benefits for small business are in place now.

Today, small businesses are paying as much as 18 percent higher premiums than big businesses. This is a result of higher administration costs for small groups. In 2014, this extra cost is eliminated, so small-business employees, along with individuals, will be able to purchase their coverage from the new health insurance exchanges in each state.

A small business with only one employee with a pre-existing condition finds itself priced out of the market or paying highly inflated premiums. In 2014, health insurance companies will no longer be allowed to charge higher rates because of pre-existing conditions.

And because no one will be denied health insurance because of a pre-existing condition, aspiring entrepreneurs will no longer be locked into a job because of health-insurance benefits. As a result, ranks of small businesses should expand.

The one year anniversary of the ACA is truly something small businesses should celebrate for what it has already done. The future will be even better.

Happy Annivesary, ACA

Below is my opinion editorial that ran in today's The State.
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One year on, health law helping South Carolinians

By SUE BERKOWITZ and FRANK KNAPP JR.

Guest Columnists One year ago, we were warned that national health-care reform would impose new taxes, fees and mandates on small businesses, increasing their health-insurance costs. Under this financial pressure, there would be more uninsured due to massive worker layoffs and small-business failures.

Today the Affordable Care Act turns one year old, and small businesses are now realizing that there are not now nor will there be insurance mandates, new taxes or fees for businesses with 50 or fewer employees (97 percent of all S.C. businesses). The vast majority of the larger businesses (97 percent) already offer insurance.

Insurance companies nationwide are reporting dramatic increases in small businesses offering health insurance to employees because the law provides health-insurance tax credits for companies with fewer than 25 workers (88 percent of S.C. businesses). Economic reports show that most of the job growth in the country this year is coming from small and medium-size businesses, and a recent survey indicates that small businesses plan to add nearly 3.8 million jobs in 2011. Bottom line: There is no negative impact on small-business growth.

But the good news isn’t just for small businesses. The ACA is helping children, adults and seniors too.

Approximately 91,000 South Carolinians who have been turned down for health insurance because of a pre-existing condition are now eligible for affordable coverage through the law’s new high-risk pool operated by U.S. Department of Health and Human Services. Children with pre-existing conditions no longer can be denied coverage.

More than 18,000 young adults in our state are projected to benefit from the provision allowing them to stay on their parent’s health insurance plan until age 26. This is giving peace of mind to parents to know that their children will have coverage in this economy where young adults are having trouble finding jobs.

Seniors are big winners under the law as well. Nearly 47,000 S.C. seniors received $250 rebate checks to offset prescription costs after they reached the Medicare doughnut hole in 2010. This year, drug companies must give seniors a 50 percent discount on brand-name drugs when the doughnut hole is reached. Our 714,000 South Carolinians on Medicare also now receive free annual check-ups and no co-pays for important preventive services such as mammograms and colonoscopies.

The Affordable Care Act also is benefiting privately insured South Carolinians by ending some of the worst insurance company practices. Insurance companies are now banned from dropping coverage when you get sick. Lifetime limits on how much insurance companies will spend on your health care are now prohibited, and annual limits are being phased out. All new private health insurance plans must fully cover preventive care services such as mammograms, annual check-ups and colorectal exams.

The law also requires health insurance companies to use your premium dollars mostly for your health-care services. Only 15 percent to 20 percent of South Carolinians’ premiums now are allowed to go toward such things as marketing, salaries, commissions, administrations and profit, compared to approximately 40 percent in 2010.

The Affordable Care Act has been extraordinarily beneficial to South Carolinians and all American citizens during its first year without causing a dramatic rise in premiums — just 1 percent according to one insurance company executive.

The future benefits are just as bright and brighter. When fully implemented in 2014, the vast majority of Americans finally will have affordable health insurance. The S.C. Department of Insurance has received millions of dollars in planning-grant funds to move forward on implementation. Even Republican and Democratic legislators are cooperating on implementation plans.

Happy anniversary, Affordable Care Act.
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Ms. Berkowitz is director of the S.C. Appleseed Legal Justice Center. Mr. Knapp is president and CEO of the S.C. Small Business Chamber of Commerce. Both organizations are founding partners of S.C. Health Care Voices.

© 2011 TheState.com and wire service sources. All Rights Reserved. http://www.thestate.com

Healthcare Reform’s first anniversary

All across the country this week small business groups will be celebrating the one year anniversary of national healthcare reform—The Affordable Care Act (ACA)—signed into law on March 23, 2010. Click here for the small business ACA facts and click here for a free webinar—Your Bottom Line: What healthcare Reform Means for Your Small Business.

Today The South Carolina Small Business Chamber and the Small Business Majority are sponsoring a Roundtable at noon in Columbia on the issue. Guest speaker for the event at the Clarion Town House is Chiquita Brooks-LaSure, Director of Coverage in the Office of Health Reform (OHR) at the U.S. Department of Health and Human Services (HHS).

The HHS OHR coordinates closely with the White House Office of Health Reform to provide leadership for and coordination of the development of the Administration’s policy agenda across executive departments and agencies concerning the provision of high quality, affordable and accessible health care and to slow the growth of health costs. Within OHR, Chiquita is responsible for policies regarding the new insurance options and Medicaid coverage created under the Affordable Care Act.

Ms. Brooks-LaSure will also be one of the speakers this evening’s BuySC Micro Conference at 6 p.m. This event will be at held at Coal Powered Filmworks, 1224 Huger Street, Columbia. For more information call Stephanie at 803-252-5733.

EPA authority support

Yesterday The South Carolina Small Business Chamber signed on to the below statement.  For more background on our postion on this issue, click here.
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Senate Amendments to SBIR-STTR Blocking EPA’s Authority: Political Maneuvers that Will Do Nothing for Small Businesses

Washington, DC - March 16, 2011 -- We, the undersigned organizations representing a diverse set
of business interests that range in size from fortune 500 companies to the small businesses that make up the backbone of this country, stand united in opposition to legislative attempts to undermine the authority of the Environmental Protection Agency (EPA) to enforce the Clean Air Act (CAA). The bipartisan CAA has a long standing history of protecting public health and the environment since being signed into law in 1970 and most recently amended in 1990 with overwhelming bipartisan support. In the last two decades, emissions of the most common air pollutants have declined by 41%, while Gross Domestic Product (GDP) has increased by more than 64%. Unfortunately, two proposed amendments unrelated to S. 493, the Small Business Innovation Research (SBIR) and the Small Business Technical Transfer (STTR) Reauthorization Act of 2011 (SBIR/STTR Reauthorization), would block the EPA’s authority to enforce provisions of the CAA. Congress created SBIR in 1982 and STTR in 1992 to stimulate technological innovation and commercialize new products that led to the creation of jobs such as those in domestic manufacturing. The SBIR/STTR Reauthorization represents the first long-term reauthorization since 2000 and would provide certainty to these critical programs if enacted into law.

However, some in Congress want to jeopardize the reauthorization of these programs by playing politics with the environment and forcing a debate around EPA’s regulatory authority. Specifically, the following proposed amendments to the SBIR/STRR Reauthorization would roll back the EPA’s ability to protect public and workforce health from dangerous emissions of carbon and other greenhouse gases (GHG):

The McConnell (R-KY) Amendment, would overrule public health experts and scientists by indefinitely taking away EPA’s ability to regulate these emissions from polluting industries. We urge legislators to OPPOSE this amendment.

The Rockefeller (D-WV) Amendment would also overrule public health experts and scientists by temporarily taking away EPA’s ability to regulate these emissions from polluting industries. Such a delay only creates further business uncertainty for forward looking businesses such as those we represent; therefore we urge legislators to OPPOSE this amendment.

These amendments won't help small businesses and won’t create jobs. In fact, they'll leave small businesses – through factors such as higher employee health costs and productivity loss – to pay the price for dirtier air and will directly put jobs at risk. Over the past 40 years, the CAA has helped our economy create millions of new jobs and is one of the primary reasons for the dramatic growth of the U.S. environmental technologies industry and its workforce. Moreover, our research shows that the benefits of the CAA are wide reaching, and a diverse array of small businesses are eagerly looking to participate in a growing sustainable economy to boost their bottom lines. Given the negative impact on small business and environmental technology jobs that these amendments are bound to have, it is highly ironic that they would be attached to the reauthorization of the SBIR and STTR — programs that have been a key component of small business success. We urge the Senate to reject these amendments should they come up for a vote, and, instead, get back to providing support for programs like the SBIR that affect small businesses the most. Passage of either of these amendments creates a slippery slope towards undoing or delaying other critical protections under the CAA.

American Businesses for Clean Energy
American Sustainable Business Council
Main Street Alliance
Small Business Majority
South Carolina Small Business Chamber of Commerce

About the Groups

American Businesses for Clean Energy (ABCE) is an initiative to demonstrate large and small business  support for EPA's clean air rules and Congressional enactment of clean energy and climate legislation.
http://www.americanbusinessesforcleanenergy.org/

The American Sustainable Business Council is a growing coalition of business networks and  businesses committed to advancing a new vision, framework and policies that support a vibrant,  equitable and sustainable economy. The Council brings together the business perspective, political  will and strength to stimulate our economy, benefit our communities, and preserve our environment.  Today, the organizations that have joined in this partnership represent over 65,000 businesses and social enterprises and more than 150,000 entrepreneurs, owners, executives, investors and business professionals and other individuals. http://www.asbcouncil.org/

The Main Street Alliance is a national network of state-based small business coalitions. The Alliance creates opportunities for small business owners to speak for ourselves, advancing public policies that are good for our businesses, our employees, and the communities we serve. http://www.mainstreetalliance.org/

Small Business Majority is a national nonprofit organization focused on solving the biggest problems  facing America’s 28 million small businesses. We conduct extensive opinion and economic research and  work with small business owners, policy experts and elected officials nationwide to bring nonpartisan  small business voices to the public policy table. http://www.smallbusinessmajority.org/

The South Caroline Small Business Chamber of Commerce is a statewide, 5,000+ member advocacy organization working to make state government more small business friendly. http://www.scsbc.org/

Medicaid feeds economy

Today the South Carolina House of Representatives begins debating the 2011-12 state budget. One important issue will be how to address Medicaid funding—reduce state funding and thus lose up to hundreds of millions in federal dollars or adopt a plan by the hospitals for them to pay extra into the Medicaid program to avoid the loss of federal funds.

In the letter below The South Carolina Small Business Chamber of Commerce weighed in on the issue with House members.
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March 14, 2011

Dear Representative:

Earlier this month we asked that the Legislature take a more business approach to budgeting in regard to spending cap legislation. As you begin the budget debate this week, no better example of a decision requiring a business approach will be the issue of Medicaid funding.

Some have expressed concern that taxpayers must be protected from increased taxes. However, the bigger fear for the small business owner is less money circulating through our economy that creates consumers. Starving our local economies hundreds of millions of dollars will worsen the economy at the very time it appears to be improving. If small businesses need protection, it is from a state-inflicted loss of customers.

Our hospitals have made a good business proposal to keep federal Medicaid funds from being dramatically reduced to our state and thus reducing the financial impact to themselves. By increasing their contribution to the state’s Medicaid program, they can help keep federal funding to our state from being dramatically reduced.

The importance of this to our small businesses is twofold. First, while our large urban hospitals might be able to weather reduced Medicaid compensation with few layoffs, the same is not true for our rural hospitals. These will certainly need to scale back their personnel costs regardless of the wishful predictions of those with little or no business experience. There will definitely be a negative economic impact on our rural communities and their small businesses struggling to survive.

Second, fewer Medicaid dollars for any health care provider will mean increased cost shifting to those with insurance. The fact that all of us with health insurance are paying for the uncompensated care of others is a primary reason for rising health insurance costs. Intentionally increasing this upward pressure on premiums, at a time when small businesses are hard pressed to offer employees health insurance due to costs, runs counter to the Legislature’s positive efforts to make health insurance more affordable (ex. raising the cigarette tax).

We strongly encourage you to accept the Medicaid funding proposal by the hospitals. It is a good business decision for them and for our small businesses.

Sincerely,

Frank Knapp, Jr.
President & CEO

Bi-partisan action on health care

This week I had the opportunity to talk with David Black, South Carolina’s new Director of the Department of Insurance. First impression—he’s very tall. Second impression—congenial, intelligent, and well informed on issues in spite of only being on the job for a few weeks. Did I mention his height?

Mr. Black made it clear that his agency was moving forward with the nearly $2.5 million in planning grants it has received from the U.S. Department of Health and Human Services for implementing some of the requirements of the Affordable Care Act (ACA). I talked about these grants in my February 25th blog.

This is very good news and reflects Governor Haley’s recent comment that the ACA is the law of the land.

We found common ground on the health insurance exchange the ACA instructs to be in place by 2014. A healthy public discussion on how the state should establish a transparent market place for individuals and employees of small businesses to purchase health insurance is productive. Even if the ACA didn’t exist, a South Carolina health insurance exchange is a good idea.

This leads me to the biggest legislative health care news of the week. A House Ways and Means subcommittee yesterday voted unanimously (yes, that means a bi-partisan vote) to send a bill creating a health insurance exchange to the full Committee. The bill that will go before the full Committee probably next week is a slightly amended version sponsored by Republican Brian White. The original bill, filed on February 24, was sponsored by Democrats Harold Mitchell and Gilda Cobb-Hunter. Now 23 other Republicans and Democrats have signed onto the bill including Ways and Means Committee Chairman Dan Cooper (R-Anderson).

This fast action on a well designed bill in the House is significant because a health insurance exchange needs to be operating by the middle of 2013 so that it can meet the January 1, 2014 deadline set in the ACA. Important and controversial bills usually take 3 or more years to be enacted. We simply do not have that much time.

The House should be congratulated for its quick action. If it can move the bill to the Senate soon, the subcommittee hearing process in that body most likely will allow for that healthy public discussion of how the insurance exchange should operate for our state. Passage of a bill early next year (or possibly even this year) would put us on track to provide South Carolinians with an exchange that should increase competition in health insurance and help us make better informed decisions as to the coverage we want.

Good news for business—well maybe or maybe not

There appears to be some good news for South Carolina businesses with workers’ compensation insurance. On good authority I have been told that the National Council on Compensation Insurance (NCCI is the state’s workers’ comp rating organization) has filed for a 3.7% overall decrease in a key component of rates called the loss cost.

The loss cost is the actual difference between the premiums received and the cost to the insurance companies for claims and directly related expenses. A proposed decrease means that the carriers have collected too much in premiums just for those purposes. (Carriers get compensated for administration, taxes, profit, etc. through another component of premiums called the loss cost multiplier.)

But before business owners get all excited in possibly saving some money on their workers’ comp premiums, their insurance companies aren’t obligated to use the new numbers if approved by the S.C. Department of Insurance. They can just go on using their current rates.

That will change if a House Bill 3111 is passed. The bill, which I testified in support of last week at a House Labor, Commerce and Industry subcommittee, will require insurance carriers to use the latest approved loss costs approved by the state. This much needed legislation is sponsored by Representatives Tom Young and Bill Sandifer (chairman of the LCI Committee).

And there’s another problem. We should have no confidence that the proposed 3.7% decrease is enough. Maybe it should be a 5%, 7% or 10% decrease.

Why should we be suspicious?

NCCI is the same organization that had claimed that the insurance companies absolutely needed increases in loss costs of 32.9% in 2005 and 23.7% in 2007. The S.C. Consumer Advocate and The South Carolina Small Business Chamber of Commerce went to the Administrative Law Court to argue that these increases were not justified by the data. The Judge agreed and reduced the increases to 18.4% and 9.8% respectively.

So why aren’t the Consumer Advocate and SCSBCC reviewing the data supplied by NCCI in their rate filing to see if the business community deserves more of a decrease?

The current state law doesn’t require that NCCI’s filing be shared immediately with the Consumer Advocate and the public. As of late last week we had only heard of the proposed reduction through parties that were shown the reports. Obviously this needs to be changed.

Even more troubling is that the law only gives the Consumer Advocate the ability to ask for a public hearing before an Administrative Law Judge if the filing is for an increase.

Senator Glenn McConnell has filed legislation (S.32) to require a public hearing on any NCCI filing.

Until both H.3111 and S.32 are passed, the business community needs to be very wary of any “good news” from NCCI.

UPDATE:  Shortly after this blog was posted, NCCI provided the Consumer Advocate with a copy of the filing in question.

Start running South Carolina like a business

Small businesses understand the need for any public or private organization to be fiscally prudent and minimize unnecessary expenditures. However, it would be rare for any successful business to artificially limit its spending to something other than monies available. To do so would prohibit the business from establishing long-range objectives for improving customer services or investing in technology needed to make a stronger company.

To the extent that the South Carolina General Assembly wants to see improvements in education, health, living standards, public safety, etc.; long-term objectives need to be established as those in the private sector would with a business plan.

But here’s the problem. The South Carolina House is getting ready to eliminate the flexibility of the state to obtain the resources to implement such a public-sector business plan, if they do craft one, by passing House Bill 3368.

In fact, a spending cap tied to the most recent lowest revenue point for an organization, as in H.3368, makes setting long-range objectives an irrelevant process. All resources will be consumed for supplying services for today with none available for investing in the future. Such a scenario would spell stagnation and eventual death for a business.

The South Carolina Small Business Chamber of Commerce has delivered a letter to our House members strongly encourages the Legislature to do two things.

First, do not tie the hands of state government for future spending when the exact needs for tomorrow and the years after are not known. Second, begin a more business-like approach for budgeting that addresses the needs of today but also sets long-range objectives for improving the state with a course of action and necessary funding investments to achieve them.

It is popular to say that we must run South Carolina like a business. It is time to do exactly that. And we can start by not passing H.3368.

SCSBCC calls for Justice Department investigation

One thing that we all should agree on regardless of our political differences is that the U.S. Supreme Court Justices should be above partisan politics and absolutely should have no conflict of interest on any rulings they make.

Below is a letter we are sending today to U.S. Attorney General Eric Holder today in regard to a very serious issue.
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March 1, 2011

Eric Holder, Jr.
Attorney General
U.S. Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001

Dear Attorney General Holder,

The South Carolina Small Business Chamber of Commerce (SCSBCC) supports the January 19, 2011, request from Common Cause for an investigation into potential conflicts of interest of Justices Antonin Scalia and Clarence Thomas in regard to the Citizens United v. Federal Election Commission Supreme Court ruling. Should the Justice Department find that the Justices should have recused themselves from this case, we ask that you file a Rule 60(b) motion with the full Supreme Court seeking to vacate the judgment.

The SCSBCC is a 5000+ non-partisan advocacy organization representing the general interests of South Carolina’s small businesses. We were founded in 2000 with the principle that what is good for big business is not necessarily good for small business.

In this matter we are motivated to insure that the voices of small businesses are heard in the political and legislative process. The Citizens United ruling threatens our ability to do that because of our inability to compete in the area of political expenditures with major corporations. If the Citizens United ruling was improperly influenced by the same big corporate interests that benefited from the ruling, it is imperative for the good of our country’s small businesses and for the good of our Democracy and judicial system that the ruling be set aside.

Sincerely,

Frank Knapp, Jr.
President & CEO