Cost of health care has small businesses hurting

June 28, 1994|By Patricia Meisol | Patricia Meisol,Sun Staff Writer

James Rouse Jr., owner of Louie's Bookstore Cafe in downtown Baltimore, was spending 6 percent of his payroll on health insurance for employees when sales began to decline last fall.

When his insurer announced a 15 percent increase, Mr. Rouse said he had no choice but to drop the coverage he had provided 18 full-time employees for nearly a decade. Yesterday he joined national and state consumer groups pushing to reform health insurance and end disparities that have forced some small businesses out of the market and penalize those who remain with higher-than-average premiums.

"There is nothing I would like to do more than provide health insurance for all my employees," Mr. Rouse said at a press conference at his North Charles Street cafe, a popular late-night spot that opened for breakfast for the first time yesterday. "Under the present system, there's no way to afford it."

The press conference was one of a series held across the country to highlight the release of a study by Families USA, an advocacy group working with the White House on health reform, and the Washington-based Small Business Coalition for Health Care Reform.

More than 3,000 small businesses in Maryland are paying at least 12 percent of their payroll for employees' health care, according to the study. More than 22,000 small businesses in Maryland are paying between 8 percent and 10 percent of payroll on health care.

Nationally, 411,000 businesses are spending more than 12 percent of payroll for health insurance for 10 million workers, according to the report, which details the staggering cost to small businesses to insure their employees. The average cost is 6 percent.

The miracle is that they continue to provide it at all, said Charles Culbertson, chairman of Maryland Health Care for All, a consumer advocacy group participating in the press conference.

Mr. Culbertson and Mr. Rouse said universal coverage, combined with cost containment and caps for employers' contributions, is the only hope of protecting health insurance for workers in small businesses.

Both men discounted the prospects for Maryland's small business health insurance reform, which kicks in this Friday, because it is voluntary. Aimed at widening coverage by making health insurance more affordable, it requires insurers to offer small businesses a standard benefits package at standardized rates. While calling it a "step in the right direction," they said prices could rise, as happened in a similar New York State experiment, if participation isn't widespread.

(Mr. Rouse said he hasn't priced the new standard-benefit package for his employees because he is still trimming expenses to remain afloat.)

"The health care crisis can't be solved by nibbling away at the problem," Mr. Rouse said. "We need dramatic change."

Mr. Culbertson said small businesses are suffering "because the insurance industry is rigged against them." Small businesses typically pay between 10 percent and 40 percent more than big companies for insurance, the report said. Generally this is because they don't have the clout to win the discounts given large employers, the report said, and as a result, small businesses pay more of the cost of the uninsured.

"I think the burden of health care should be shared, between the government, business and the employee. Consumers already are paying a lot, between premiums and co-payments, and I think businesses are willing to help. It's just when the burden gets so heavy," Mr. Culbertson said.

He noted that President Clinton's proposed health reform plan and a bill by Sen. Pete Stark, Democrat of California, acknowledge the different cost to small businesses by capping the employers' share of health insurance at between 3.5 percent and 7.9 percent of payroll.

As a restaurateur who provided health benefits and who supports universal insurance, Mr. Rouse is a rarity. By dropping coverage, he eliminated an expense that most of his competitors didn't have in the first place.

Small businesses as a group do not support national health insurance and the national restaurant industry has been waging a campaign against mandatory employer-paid insurance.

Mr. Rouse called the National Restaurant Association's attitude "shortsighted," and based on an assumption that anything the government does is bad and, therefore, the government should do nothing.

"What we want is good government," he said.

"The fact is, the state of health care in this country is anarchy and what we need is a more organized system," Mr. Rouse said, "and I think it's achievable."

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