Business factions split on health plan deal

The Massachusetts business community splintered yesterday over the deal reached by state House and Senate leaders to impose a $295 tax per employee on businesses that do not offer health coverage.

Opposition from small business advocates and the high-tech community was fierce. But business lobbying groups that had adamantly opposed a payroll tax sought by the House quickly embraced the more limited concept of a per-employee levy to help fund the state's free care pool. Supporters included the Greater Boston Chamber of Commerce.

''At the level we are talking about in this proposal, it's hard to make a case that this will drive a small business under or drive them out of Massachusetts," said Dr. James J. Mongan, chamber chairman and also chief executive of Partners HealthCare, the state's largest hospital network. The tax proposal will apply to businesses with 10 or more employees.

Mongan said many business leaders came to understand they cannot avoid all responsibility for solving the state's health insurance problems, while labor and healthcare advocates realized they could not get the payroll tax they sought.

''All have been able to achieve a reasonable balance," he said.

Chamber executive vice president Jim Klocke said he did not view the $295 levy as onerous. ''I don't think we're talking about a tax here. I think we're talking about equalizing business contribution to the free care pool," Klocke said. The free care pool is a state fund used to reimburse hospitals for providing care to low-income people without insurance.

In addition to the chamber, yesterday's deal on Beacon Hill won support of the Massachusetts Business Roundtable and the Massachusetts Taxpayers Foundation. The Associated Industries of Massachusetts, which quietly opposed the measure previously, said yesterday it remained undecided and would wait for details once proposed legislation is drafted.

But opposition quickly came from several fronts, including the Massachusetts High Technology Council and the state chapter of the National Federation of Independent Business, which represents 10,000 small businesses in the state.

''It's an ominous development for the Massachusetts economy," said Christopher Anderson, the president of the technology council.

Anderson compared it to other state taxes and surcharges that he said have outlived their original purpose but have never been repealed. He cited a $16.80 annual healthcare tax per employee, which is a leftover from a failed 1988 health reform program, and a workforce training fund surcharge layered atop state unemployment insurance taxes.

''I'm surprised that certain elements of the downtown business community acquiesced so readily" to the $295 levy, Anderson said. ''This will hinder what is already a competitive market for creating jobs." Many small business operators will be outraged by the Legislature's plan, said Bill Vernon, the president of the Massachusetts chapter of the National Federation of Independent Businesses. He said the lack of unity in the business community over the plan is a result of the major role healthcare plays in the state's economy.

''The insurers and the healthcare providers are a very, very large part of the business community, more than other parts of the country, which I think is a big part of the problem," Vernon said.

While the debate raged among lobbying groups, word of the plan had not yet trickled out to much of the business community yesterday afternoon. In Chatham, at the Chatham Coffee Company, store owner Caroline Geishecker said she was angry that Beacon Hill leaders had decided to shift the state's health insurance problems to small business owners.

''Why are they picking on people who are trying to do the right thing?" she said. Geischecker said she would make moves to avoid paying a tax that could amount to $3,000 a year or more for her businesses, which expands its payroll during the summer season. ''I definitely won't hire more than 10 people. I will only hire full-time employees, no part timers, and make sure that I don't grow my business any more," she said. ''What's the incentive for me to grow?"

Christopher Rowland can be reached at crowland@globe.com.