So says Kathleen Sebelius in defending the ObamaCare mandate on small businesses of 50 or more employees. CNS News asked the question of whether the mandate might not keep small business owners from hiring that 50th employee as a means to avoid paying either government fines or health insurance policies. Au contraire, says Sebelius — businesses are actually looking forward to being forced into paying more overhead:

“I hear, frankly, just the opposite from small business owners … where they say the way that they retain and recruit the best possible employees is with a benefit package that is solid; that often they lose good employees because they can’t provide affordable health coverage, they go down the street or around the corner, even though businesses like Frager’s are a family–absent that protection that people have for their employees,” Sebelius said at a press conference about the Affordable Care Act’s insurance exchanges at Frager’s Hardware on Capitol Hill in Washington, D.C.

“So,” Sebelius said, “I think that this will actually be a great incentive–as you know the 50 people also have lots of part time worker exclusions, seasonal worker exclusions–and I don’t hear anything from people who say, ‘Oh, I would never grow my business past this threshold’ but are very enthusiastic about the notion that this is a competitive issue. It’s a bottom line issue and when they’re being essentially in the market place paying substantially more than their competitors for exactly the same coverage, they feel at a great disadvantage so I think, what I hear from folks is they see this as a huge step forward.” …

In her remarks at the news conference, Sebelius highlighted the reasons she believes many small businesses do not currently provide health insurance for their employees.

“The health insurance market today is often broken, especially for small businesses like Frager’s. Small companies can pay up to 18 percent more for the same insurance that the large chains are able to get and those are their competitors and small business owners are more likely to be victims of large premium increases or to be offered coverage that might exclude care for various pre-existing conditions like cancer or diabetes, and that’s a big part of the reason why small employers are less likely than large companies to offer health benefits to their workers.”

So much silliness, so little time. Let’s start with the 18% disparity in offering health insurance between large risk pools and small risk pools.  Gee, to what might the difference in premiums be related?  Hmmmm.  It’s also related to the fact that prices usually drop when producers are guaranteed a larger demand, which only takes one visit to Wal-Mart and Target to understand.  Insurers can negotiate lower provider prices when they add tens of thousands of people to their plans, but not so much when they add a few dozen.  Lower provider prices means lower costs for the insurer, and hence lower premiums. It’s called economies of scale, known everywhere but in the public sector, apparently.

If ObamaCare interferes with that process, it won’t be to reduce the prices for the smaller business; it will be to raise prices for the larger businesses — or more likely, just raise them for everyone.  That’s exactly what happened in Massachusetts and Maine when business and personal mandates got imposed.  The $750 per worker per year fine will look a lot tastier to smaller businesses, especially when the federal government will end up subsidizing employee insurance anyway.  Given that the average single-person policy runs over $3200 per year here in Minnesota, why wouldn’t businesses shrug off the health-insurance costs and just give everyone a $1000 per year raise instead?  They would still be more than a thousand dollars ahead of the game at current prices, let alone what will happen to prices after ObamaCare comes fully into force.

Oh, right — competition.  Sebelius insists that small businesses will love this because it will make them more competitive in the labor market.  If that were true, though, they’d already offer health insurance.  Big business owners will love the bill because it forces their smaller and more nimble competition to take on more overhead cost either through insurance or government fines, which will make the smaller businesses less competitive, not more.  What this mandate does in practice is to make sure no competitor grows beyond the 49-employee limit without taking on artificial burdens of overhead, and that doesn’t help smaller players in markets.