Understanding the Health Care Mess Facing Small Business

What reform will likely mean to thousands of small business owners looking for a break.

Q: Small businesses are the biggest source of jobs in this country, yet how many actually offer health care insurance to their workers?

Only about 40% the smallest firms (less than 20 employees) offer health care. Approximately 90% of U.S. businesses have less than 20 employees, which means there are an awful lot of smaller businesses out there that aren’t offering a health plan.

Q: Congress is currently looking at several bills to overhaul health care in this country. Do small companies have a voice in the discussion?

The small firms, for the most part, have been left out of this debate. They have not been a major player because they don’t have the money to contribute. They don’t control anything. For years and years they’ve had to take it or leave it from insurance companies that might have offered them a plan. It isn’t like they self insure like the big guys do. 

Q: There are some significant proposals on the table, including one that would aim to keep costs down by creating a government-supported insurer to compete with private companies. What kind of reform would be helpful to small businesses?

We need more competition at the state level. There’s always a reluctance to closely regulate very profitable enterprises and that certainly includes the insurance industry. But if you’re trying to craft a national plan and you’re trying to create competition, the smarter people realize it’s going to have to be on a state-by-state basis.

Q: How would that work?

What do you do when Blue Cross and Blue Shield have 90% of the market in Alabama? Do you introduce a new healthcare plan in Alabama? Probably not. You allow Alabama people to buy healthcare anywhere in the country they want, which they can’t do now.

Q: Some reform proponents advocate an employer mandate similar to the one in Massachusetts, which requires all residents to have health insurance and penalizes businesses that don’t offer insurance $295 per month per employee. Do you think that's a good idea?

It's not clear how the state is going to keep (its insurance system) going. They're running a $300-$400 million deficit right now. What's happened is the state legislature wants more and more things covered -- like mental health, like mammograms. What happens to the price then? Zoom. Some insurance companies that originally agreed to sell insurance (in the state) have dropped out. They’re going bankrupt with the Massachusetts plan.

Q: Average annual premiums for small businesses are expected to jump 15% next year, meaning the average premium per employee will rise from $4,800 a year to $5,500. What can a business owner do?

Small business owners spend a lot of time and energy shopping for healthcare. Between 30-40% of small firm owners who offer health plans change insurance carriers every year. Why? Because the minute a small firm gets a notice that its premium is going up 20 percent they call an insurance broker and say: "Get me some estimates. If I pay (the higher premium) I have to drop (my plan) so see what you can do."

Q: What are some innovative ways companies are keeping costs down?

The smarter ones are in industrial parks in the suburbs. Maybe five small businesses get together and hire a health care company to come to their offices once a week. Some introduce employee assistance programs. Some will subsidize employee gym memberships. They try the small things that are practical but not too costly.

Q: What if a small business owner can’t afford employee health care? What are her options?

Many are giving employees money and saying, "This is all I can afford. Go buy whatever you can on the market."

Q: Are some small businesses scared to offer insurance because of the high cost of preexisting conditions, which can cause premiums to soar?

I have friends who have told people "I may be able to offer you a job, but I may not be able to offer you health insurance (if you have a preexisting medical condition). I only have 10 employees and if you have cancer or a bad diabetes condition or something else you’ll blast my premium through the roof. I also have to ask you to sign a piece of paper that I told you this so you won’t sue me if I can’t offer you health insurance."

Q: This is all very depressing. What do you think the odds are that Congress will pass health care reform?

Do I think there will be some bill? Yes. Do I think it will be much more limited than what they’ve been talking about? Yes. It is possible that there will an option where small business owners can buy insurance in any state -- and the price for that may be no (government-financed) option.

Q: Can a small business do anything now to prepare for a new law?

A lot will depend on whether there is an employer mandate. It doesn’t look like there’s going to be one. From our perspective, that would be a disaster. 

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