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Nonprofits must be part of health-care debate

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A longer version of this article was published in The Cohen Report, a publication of The Nonprofit Quarterly.

Rick CohenRick Cohen

Given skyrocketing costs, health-care reform may be a big factor in the future financial health of the nonprofit sector.

Yet lawmakers and policymakers in Washington, D.C., have overlooked nonprofits.

So nonprofits have to get engaged in the specifics of health-care reform and make their needs known to decision-makers.

Consider:

  • Nonprofits face serious challenges in providing and affording health-care coverage for their employees, especially in light of health-care insurance costs rising faster for small nonprofits than for small businesses;
  • Without appropriate health-insurance subsidies, nonprofits will find themselves either cutting benefits to their employees, stalling wages to afford benefits, or facing serious and growing financial pressures;
  • Recent Congressional attention to the needs of nonprofits, late in coming, still fails to give small nonprofit employers policy parity with small businesses in terms of health care reform, treating nonprofits as second-class corporate citizens in U.S. public policy

For decades, the nonprofit sector has been struggling to be taken seriously. Part of that struggle is to be able to provide competitive wage and benefit packages that can attract people to the nonprofit sector on career paths, not simply as temporary way stations to better-paying jobs in the corporate and government sectors.

A crucial component of that package is benefits for retirement and health.

If policymakers fail to recognize and address the needs of nonprofit employers and their 12.8 million employees, the damage to the sector will be serious and long lasting.

Among roughly 30 million uninsured Americans are a good number of poorly paid people working for nonprofits, particularly the smaller organizations in the U.S.

At for-profit and nonprofit small employers alike, providing and affording health care coverage has become the number one challenge.

Why do so many small employers — and increasing numbers of them — not offer health insurance coverage?

The reason is the soaring cost of health insurance, according to two-thirds of organizations responding to the Kaiser Family Foundation’s 2009 survey of 3,188 randomly selected public and private firms with three or more employees.

Nonprofit employers suffering from constrained charitable and government revenues during a deepening recession are no less cost-challenged in providing benefits, and the vast majority of nonprofits are small employers.

Government cannot assume nonprofits have access to non-governmental charitable revenues that will help them absorb health benefits’ rapidly increasing costs.

Plummeting charitable donations and philanthropic grants last year, this year and next year, combined with state and local budget crises, leave many nonprofits struggling to maintain their services and programs as they are, with no extra resources to keep up with soaring health insurance costs.

Nonprofits will need targeted assistance to effectively participate in and benefit from national health-insurance reform.

But in addressing the health-insurance needs of small businesses, Congress and the White House often ignore the fact that nonprofits — 1.8 million tax-exempt organizations, nearly 1.2 million of them 501(c)(3) public charities — are a significant piece of the nation’s small businesses, employing 10 percent of the workforce, though paying only 8 percent of total wages.

In a recent report, the President’s Council of Economic Advisors identified the health-insurance problem for small employers clearly: Small businesses pay up to 18 percent more than larger firms for the same health-insurance policies, a cost penalty that leads the majority of small businesses not to provide coverage for their employees.

The President’s Council proposed giving tax credit to small businesses that provide health insurance for their employees.

But as the National Council of Nonprofits reminded the President’s Council, while most they are small employers, nonprofits cannot benefit from proposals to apply tax credits against firms’ income taxes since nonprofits don’t pay income taxes.

In response, members of the Senate Finance Committee designed a tax credit that can be used by nonprofit employers, although it would give nonprofits a smaller subsidy, proportionally, than small businesses of comparable size.

The current trajectory of cost escalation and coverage cutbacks in the sector is untenable for the health of public charities.

As employers without access to major parts of the capital markets for investment, nonprofits, especially smaller organizations, need subsidies for their health-insurance costs at parity with small business employers.

The distinctive value of smaller nonprofits, besides the services they provide throughout the nation, is their function of providing representation of and advocacy for diverse communities.

If they do not want to wither because of insufficient, ill-informed, wrong-headed policy decisions by our nation’s leaders, nonprofits need to step up and get involved in the debate over health care.


Rick Cohen is national correspondent for The Nonprofit Quarterly and a regular contributor to the Philanthropy Journal.

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