Maine Sens. Olympia Snowe and Susan Collins have won their share of national attention lately. With questions bubbling up about whether Collins could serve as another Republican ally for the Democrats on health care reform, following Snowe’s pivotal vote on the Senate Finance Committee’s bill, both women are in the spotlight.

But getting less attention is just how the reforms could affect the business community in Maine and nationwide. Mainebiz asked the senators about that and several other topics, including whether recent efforts to step up Small Business Administration lending are working and whether an about-face by the Navy could jeopardize jobs at Bath Iron Works. Some questions were directed at both Snowe and Collins, while others were addressed to one senator individually. Below is an edited transcript of their answers, with Snowe’s responses first.

SEN. OLYMPIA SNOWE

R-Maine

Elected to U.S. Senate in 1994, reelected to third six-year term in 2006

Committee assignments: Committee on Finance; Committee on Small Business and Entrepreneurship, ranking member and former chair; Select Committee on Intelligence; Committee on Commerce, Science and Transportation

Health reform fast facts: Sen. Snowe references her advocacy, as chair of the Senate Small Business Committee in 2003, for the "association health plan" that would have allowed small business to band together across state lines to negotiate less costly health insurance prices through an exchange. In May, she reintroduced a similar bill that included some reforms that were incorporated into the Senate Finance Committee's health reform bill.

What are your concerns about the effects of the health care bill in terms of the impact on small businesses?

It certainly would be positive because of all of the initiatives that have been incorporated in the Senate Finance bill; I’m even working on additional measures as well.

I met a group in November, a small business coalition, and it’s heartbreaking to hear some of the stories that are conveyed to me about how they contend with rising prices, or the fear of confronting the rising prices and their premiums, which is predictably high on an annual basis. I mean they’re double-digit increases and it’s just painful.

One of the primary reasons for addressing health insurance as far as small business is concerned is because of the skyrocketing increases that they have experienced over this last decade, and they have no refuge in terms of large pools or seeking alternative competitive plans. They’re held hostage to these double-digit increases.

Secondly is the fact that 52% of the uninsured are small business owners, their employees and [dependents]. That constitutes a significant part of the number of the uninsured in America, so clearly it directly correlates with the rising number of uninsured. That’s very important to understand, and also making sure that we create a foundation for access to affordable health plans by expanding the size of pools, going across state lines.

I was staggered by what Blue Cross gave in its report to us two weeks ago that indicated — not that I hadn’t heard it but it’s still staggering — that the most popular plan, not because they liked it but by virtue of the fact it was probably the most popular affordable plan, is a $15,000 deductible and a 36% actuarial value. That would not be what constitutes an affordable plan nor reasonable in my view. And I know that’s the view of small business owners and that’s what they’ve basically been left with and resigned to.

I talked to a [self-employed businessman] who works out of his house, and he was telling me, he’s in the Dirigo program, and he received an envelope [recently] that would indicate his cost for the plan for the next enrollment period and he just couldn’t bring himself to open it. It made his heart start pounding, so he has not opened it yet because he didn’t want to see what the price increase would be. That’s a story that could be told many times over in the state and across the country.

Sen. Snowe on further reforms she’s advocating:

Give [small businesses] tax credits that start sooner, like in 2011. I’d like to even do more than what we were able to do in terms of availabilities to those with 25 or fewer employees. I’d like to expand that availability so it doesn’t start phasing out at 20 employees and then for those whose average wages are $40,000 or less.

Maine is the unfortunate example of what I think exists in … at least 34 states where there are only a few insurance companies, maybe five at most that dominate the market. In Maine we know at least two that dominate close to 90% of the market. At least five carriers in 34 states control 75% of the market, and that was compared to 26 states in 2005 and 19 in 2002. So it’s an alarming trend and obviously these premiums are higher because there is no administrative savings, it’s more costly and it drives up the cost in all respects for a small business owner so they have no release.

Allowing a lot of businesses to have access to the exchange, that’s another goal of mine. We’ve increased it with up to 50; those with 50 or fewer employees will have access to the exchange immediately, and then those with 50 to 100 between 2013 and 2014. States could choose to go up to 100. But I think we should do that immediately, to go up to 100 immediately and then we go up to 200 in 2017. I think we should advance that so more companies have the ability to have access to the exchange. It’s a competitive marketplace because insurance companies will be required to show their plans and consumers will have the ability to do comparative price shopping, and that’s what’s going to drive the competitive forces among insurers.

Sen. Snowe on the association health plan:

I reintroduced that legislation and faced enormous obstacles in trying to overcome the industry’s opposition to it, which was really unfortunate because it would have opened up national plans to small businesses. But frankly, I couldn’t get the kind of support even from my side of the aisle, the Republican side, which you would have thought would be a natural base of support.

So, I’ve been committed to doing what I can, wherever I can on the issue of health care, affordable health insurance for small business owners.

Sen. Snowe on the effects of delaying health care reform:

You think about all the tax cuts that were extended repeatedly over this last decade, part of it could have been used to help small businesses and create a level playing field for competition, access to big national pools and regional pools if necessary, or state pools, whatever would work and to provide the ability for them to have the same access to affordable health insurance plans as large companies. And they were denied that, so we forfeited an opportunity, and I think frankly short-circuited this process to the extent that it’s now become an overwhelming problem and in a very difficult economic climate. It could have changed it all.

You’ve praised the Small Business Administration for proposing increases in size definitions for 71 types of businesses after more than two decades. How will that help Maine, where most businesses already qualify as small businesses under the SBA? [The SBA is accepting public comments on the proposed updates through Dec. 21. Visit regulations.gov to submit a comment.]

We don’t want to be so restrictive on access to programs conditioned on size. If we can shape the policies to include more small businesses, that will help the economy. We want to make sure the smallest of businesses have the ability to have access to those programs and also update the standards to reflect today’s realities.

You’ve been a strong proponent of increasing Small Business Administration loan guarantees and loan sizes, and we’re still hearing that credit is not flowing to small businesses. Do you think it’s a matter of giving these efforts more time to work, or does more need to be done?

I think it’s a combination. This has been a longstanding, persistent problem, one that I have been very much concerned about ... this year in the aftermath of the financial breakdown, that small businesses are going to be left out in the cold with the respect to access to affordable lending and to credit. It’s still an issue that is prevalent, in Maine and across this country, and it puts a lot of small businesses at risk and in jeopardy, if they can’t get access to credit.

I’ve been reading about banks that are just truly not lending so I think yes, in terms of addressing this issue and expanding the loan programs and the ceilings, absolutely. I think it’s important. We’ve also got to figure out what is wrong with the small banks that are not engaged in offering loans to these small businesses for fear of taking the risk.

SEN. SUSAN COLLINS

R-Maine

Elected to U.S. Senate 1996, reelected to third six-year term in 2008; SBA New England Administrator, 1992-93; Maine Commissioner of Professional and Financial Regulation, 1987-92

Committee assignments: Committee on Homeland Security and Governmental Affairs, ranking member and former chair; Committee on Appropriations; Committee on Armed Services; Special Committee on Aging

Health reform fast fact: Sen. Collins references her previous support for "means testing" Medicare Part D, through which higher-income seniors would pay more for prescription-drug coverage. The March 2008 amendment failed in the Senate by a vote of 56 to 42.

What are your concerns about the effects of the health care bill in terms of the impact on small business?

First of all, when I talk to small businesses and ask them about health care, the number one issue, inevitably, is the cost of health care. The bills that are before us in Congress, in my view, do not do enough to try to rein in the cost of health care. I support the goal of expanding coverage to the uninsured, but I don’t think we can achieve the goal of universal coverage until we find a way to make health care cost more affordable to employers, to families and governments alike.

I’m also concerned that the bill has bizarre consequences for small businesses, and let me give you an example: In the Senate Finance Committee bill, there are tax credits that are supposed to help very small businesses provide health insurance for their employees, but the way they are structured, they actually will discourage small employers from adding to their work forces or providing pay raises. The credit reaches its peak for a small business with 10 employees, paying an annual salary of $20,000. If that small business adds one employee, which presumably we’d want the small business to do, to hire more people, the credit actually goes down in value. And when it gets to 25 employees, it gets phased out all together. Similarly, if the small business were to give its workers a pay raise, so that the average pay is above $20,000, they also start losing the value of the credit. So that’s a disincentive to pay better wages and hire more people and I don’t think that makes sense at all.

I’m also concerned about the penalties in the bill for small businesses. If a business has more than 50 employees and hires a worker who declines the health insurance provided by the employer, the employer is actually penalized if that employee gets insurance through the subsidized health insurance exchange, and that doesn’t seem fair either. If an employer is trying his or her best to provide health insurance, but a worker turns down the offer of insurance, say because they think that it’s not affordable enough, I don’t think it’s fair to slap a fine, a penalty, on that small business, and yet the bill would do just that. So, there are a lot of unintended consequences.

My other major concern about the bill is that I think it will cause small businesses and middle-income families who don’t qualify for the subsidies in the bill, or only to receive a part, to pay more for their insurance than they otherwise would.

According to a recent Daily Kos poll, about 61% of Mainers favor a public option. Can you explain your lack of support for a public option in light of that?

Well, first of all, I have no idea whether that poll is accurate since the Daily Kos is a very left-wing advocacy group, but let’s assume that it is accurate. What I found is that as I talk to my constituents about what a public option really entails, generally they understand my opposition to it. What we’re talking about is creating a government-owned, government-run insurance company to compete with the private sector. That is a massive government expansion into the private marketplace. I think that government has been getting too involved in the private sector as it is and this would be a further expansion.

The Congressional Budget Office has projected that premiums would actually be higher with the public option. Now, other studies have suggested that premiums would be lower, but that they would cause a collapse of the private market. That means that people who are happy with their insurance now, through an employer plan, would lose access to that insurance. One study has estimated that over 100 million people would shift from the private market to the government plan and that would cause the collapse of the private market. I just don’t think it’s the answer.

To concerns about lack of competition or discrimination against people with pre-existing conditions or the high cost of health care, those are all serious issues and they’re issues that we can address without creating a new, government-run insurance company.

You’ve said you’re troubled by the proposal to fund reform by cutting $500 billion from Medicare. How do you suggest we pay for the reform?

I think part of the problem with the bill is that it would finance a massive expansion of government, totaling a trillion, over a trillion dollars if you look at the House bill for example, and it would do so by slashing $500 billion out of the Medicare program and by imposing a series of new taxes, fees and penalties on small businesses, on individuals and on medical equipment manufacturers and on insurance companies. The problem with that is those increased taxes … are going to drive up the cost of health insurance. For example, probably half the insurers in this country are nonprofit and yet they are going to have new taxes to pay. They are going to pass that on to the consumer.

So I think we need an approach that focuses more on reducing the cost of health care and then invest those savings into expanding coverage. I would start by providing generous tax credits for small businesses because over 60% of people who are uninsured work for small businesses that can’t afford to provide them insurance. So to help to make health insurance more affordable to small businesses, you would lower the number of uninsured Americans by a substantial amount, by millions.

You voted for Medicare Part D, which was an unfunded new health care program and the costs are estimated now around $1 trillion. But the Finance Committee’s health care bill would be offset by cuts elsewhere, and Obama has said he won’t sign it if it increases the deficit. Can you explain your rationale?

Medicare Part D has turned out to be far less expensive than the amount that you just quoted … I voted to means test Medicare Part D so that higher-income people would be paying more for their drug coverage and that would have lowered the cost even further. My position didn’t prevail on that, but I did vote to means test — in other words to require high-income people to pay more of a premium than lower-income people for Medicare Part D, so I’ve shown that I’ve been concerned about the cost of Medicare.

Despite increased Small Business Administration loan guarantees and loan sizes, we’re still hearing that credit is not flowing to small businesses. Do you think these efforts need more time to work, or does more need to be done?

Maine has experienced a 230% increase in SBA loan volume since the beginning of the year as a result of the new programs that are part of the stimulus legislation, the recovery act. Karen Mills, who we have the advantage of being from Maine, met with me just a week ago to talk about the fact that the SBA is running out of money because the expanded programs have been very successful.

One of the most important changes that was made, temporarily, to attract more banks into doing the SBA lending was to increase the amount of the guarantee on the loan and that has been successful in drawing in lenders that had either stopped participating in the SBA programs or were participating only at very low levels. So I think that those programs by and large have been a success. The only one that I have concerns about is [the ARC loan] program that was intended to help businesses that were having difficulties because of the economy in meeting their credit obligation and that program appears to be headed toward a very high default rate and, obviously, we’re not doing a business a favor if we’re pouring more money into it only to have it default on a greater amount of the loan later.

What are your thoughts on the SBA reviewing and updating its size standards?

We have to be careful in that area. I want the SBA programs to truly be targeted toward smaller companies and the size standards are already pretty generous, so I want to make sure that we don’t increase the size standards — which usually are not by number of employees but rather by the monetary size of the firm — that we don’t increase those to the point where we lose sight of what the SBA’s mission is. Big companies have far more financing options than do small companies and I want to make sure that the SBA retains its focus on smaller businesses.

The U.S. Navy has said it will scrap plans to purchase Littoral Combat Ships from two contractors, one of which is Bath Iron Works, and revert to a competitive bid process. What’s going on there?

It looks like instead of proceeding with two contractors, one of which is the BIW-led team, the Navy is going to seek competitive bids to award the first 10 ships all to one company, one contractor. Right now BIW is the head of one team and Lockheed Martin is the head of another team and originally, as recently as six months ago when I was talking to the chief of naval operations, he told me he did not think the Navy would select just one contractor, but rather they would procure ships from both contractors since the two designs for the Littoral Combat Ships are very different from one another and they have different strengths. They’re both designed to operate in shallow, coastal waters, and eventually the Navy is going to buy 55 of the ships.

It now appears that the Navy is going in yet another direction and believes that it can get a more affordable price by giving the first 10 ships to just one contractor… Now, this is just on the Littoral Combat Ships, [which] are not actually built in Bath, they’re built in Alabama. It’s still an important program to BIW, but as far as the number of jobs, it pales in comparison to the DDG-1000 destroyer program. And we just passed the Defense Authorization Bill, and BIW will build all three of this giant new destroyer, the DDG-1000.

Interviews by Jackie Farwell, Mainebiz staff reporter