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A measure recently passed by a U.S. House committee that would require employers with annual payrolls exceeding $250,000 to provide medical insurance to their employees is drawing brickbats from Maryland business executives.

The proposal calls for a penalty of up to 8 percent of payroll if the companies did not provide insurance.

"That won't help small businesses," said Doug Hillmuth, co-owner of Hillmuth Certified Automotive, which has shops in Gaithersburg, Clarksville and Columbia and provides medical insurance to some 24 employees. "Small businesses will have to make up those costs somewhere. It will drive prices up."

Placing a mandate on employers could cause businesses to lose control of costs, said Ronald Wineholt, vice president of government affairs for the Maryland Chamber of Commerce. "We support health care reform. A lot needs to be done."

Medical liability reform and wellness initiatives are areas that should be given greater consideration, Wineholt said. "There needs to be more work on cost controls, not pushing the burden of health care costs further onto businesses," he said.

The plan approved by the House Energy and Commerce Committee also would allow many small businesses to receive a tax credit for medical insurance offered to employees and provide a public insurance option to compete with private insurance carriers. The full House is expected to consider the proposal after returning from its recess next month.

The Senate is considering what some analysts call a more centrist proposal before breaking for recess today.

Faced with escalating insurance premium costs and a recession, some businesses in the state are dropping medical benefits, fueling the debate for coverage, according to a recent report by consumer health organization Families USA. The study says that 115,000 Maryland residents will lose medical coverage between January 2008 and December 2010.

Not all Maryland business executives oppose funding medical insurance through mechanisms such as a business payroll tax.

Jan Naylor, president of hardware store chain A.D. Naylor & Co. of Oakland, supports a plan endorsed by the Maryland Health Care for All Coalition that would implement a 2 percent payroll tax on businesses. The tax increase would be offset by lower insurance premiums that the plan brings through a statewide insurance pool that will result in better volume-discount rates, she said.

The Greater Baltimore Black Chamber of Commerce, Prince George's Black Chamber of Commerce and Black Chamber of Commerce of Anne Arundel County have also endorsed the Health Care for All plan.

Debate on public option

The public option — a government-run plan that would compete with private carriers — concerns some business executives. That's largely due to its potential for costs to escalate, they say.

"It's a bad idea that would drive up prices and taxes," Hillmuth said.

But having the government compete with private insurers will reduce national insurance costs by at least $230 billion, according to a report released last week by the Maryland Public Interest Research Group. "This option would expand consumer choice, but it would also help bring down costs by forcing private insurers to be more competitive," the report says.

More savings can be realized through streamlining medical billing, adopting electronic medical records and making care more effective, according to the report. The state of Maryland alone would save at least $54 billion over the next decade under such reforms, the report says.

This report originally appeared in The Business Gazette.