Feeling The Pinch

Small Businesses Hope Health Care Debate Brings Solutions To Their Insurance Plight

August 28, 2009|By Hanah Cho | Hanah Cho,Hanah.cho@baltsun.com

Like many cash-strapped small-business owners burdened by rising costs and fewer customers these days, Mark Derbyshire thinks a lot about health care. Specifically, how to keep paying for employee coverage that continues to skyrocket each year.

So, Derbyshire made a tough decision this year to not offer family coverage to newly hired employees, while maintaining the current plan for his 30 employees at Park Moving and Storage in Aberdeen.

As Congress works to fix the health care system, controlling the growing tab for medical insurance is an especially important concern for the nation's 6 million small businesses, whose support is crucial to any reform. While trying to extend coverage to 47 million uninsured Americans, lawmakers are also trying to reduce expenses.

"We see two sides of this. One is, 'How do we start to contain costs and reduce costs over time for the ones who currently offer coverage?' " said Amanda Austin, director of federal public policy for the National Federation of Independent Business, a strong advocacy group that opposes a House proposal that calls for an employer mandate to provide health insurance. "[And] how do we get an affordable package for those who want to start offering coverage?"

For Derbyshire and other small-business owners, health care coverage is in a crisis and can no longer be maintained without making difficult choices. Small firms providing family coverage have seen annual premiums more than double since 1999, according to an annual survey by the Kaiser Family Foundation and Health Research & Educational Trust.

NFIB members, whose firms average 10 employees, have identified health insurance costs as their No. 1 concern since 1986.

"It's not sustainable anymore," said Derbyshire, whose family business was started by his father in 1956. "I've talked to other people; it's to the point where they're cutting out of insurance, most likely they're cutting out dependents and only offering it to individuals. That's where we're headed, too."

Small businesses are especially hard hit because they do not typically have the power to negotiate better deals from insurers, as do larger companies, said Bradley Herring, assistant professor of health policy and management at the Johns Hopkins Bloomberg School of Public Health.

"In some sense, everyone is struggling with rising health care costs," he said. "When you start with the slightly higher base, small firms face relatively higher premiums. That growth takes a bigger hit on smaller firms."

On average, businesses pay almost $4,000 a year per employee for single coverage and about $9,300 for a worker with a family plan, according to Kaiser's survey.

It might not come as a surprise that more large companies offer employee health coverage than small firms. About 99 percent of employers with 200 workers or more offer health benefits, while fewer than half of those with no more than 10 employees do so, according to Kaiser. That's down from 56 percent in 1999.

Herring strongly advocates a health insurance exchange program, a component of several proposals under consideration by House and Senate committees. The exchange would create a marketplace where individuals and small businesses can compare prices and benefits and shop around.

"The thought would be that, collectively, small firms and individuals could act like a really large firm and negotiate better rates and have more market power," Herring said.

Other major elements of proposals in the House and Senate mix a combination of requiring employers of certain sizes to provide medical coverage or pay a payroll tax of up to 8 percent as well as providing a tax credit to help businesses who want to offer health benefits.

NFIB strongly opposes the coverage mandate and the tax, arguing that they don't address ways to contain out-of-control health care costs for small businesses.

"We're looking for more incentives than major penalties," said Austin of NFIB. "I think when you add costs with no end in sight and don't figure out how to curb costs, they put people in a position to make choices. Do I hire another employee or keep health care?"

But some small businesses support requiring all employers to provide some health insurance on the theory that a level playing field would bring costs down.

"The business community in Maryland would benefit from all businesses being required to do their fair share," said Vincent DeMarco, president of the Maryland Citizens' Health Initiative, whose proposal for universal health care in Maryland failed in the General Assembly earlier this year.

Janna Naylor, president of Naylor's Hardware stores in Garrett and Allegany counties and in West Virginia, favors such a move. Naylor's business has been offering health benefits to employees since the family company was founded by her great-grandfather 125 years ago.

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