Small Businesses Want Relief From High Health Costs–But Differ On How To Get It

Brian England and Jim Henderson have a lot in common: Both are small business owners. Both are struggling to provide health care coverage to their workers in the face of relentless cost increases. And both want the government to do something – sooner rather than later.

“This system is so screwed up,” says England. “They’ve got to fix it.”

But beyond that, they part company.

England, the 63-year-old owner of an auto-repair business in Columbia, Md., wants aggressive federal intervention, including new requirements that everyone have health insurance and that businesses provide coverage to their workers or pay a penalty. He also backs creating a government-run insurance plan, referred to as a “public plan,” to compete with private plans, saying it would ensure the availability of affordable coverage.

Jim Henderson, 45, whose family owns a construction and industrial supply business in St. Louis, wants a drastically different approach. He says the government should stop stifling the market by lifting the prohibition against buying insurance across state lines. Greater competition, he says, would drive down costs.

He opposes requiring employers to pay for insurance and a public plan. “The role of the federal government is not that,” he says. “It muddies up the water rather than clears the water.”

With 68 million workers, small businesses will have big clout in deciding the fate of President Barack Obama’s effort to overhaul the health care system. In 1994, the small-business lobby, led by the National Federation of Independent Business, helped kill the Clinton plan, partly because it included an employer mandate.

Since then, health costs have risen sharply. And the proportion of small businesses offering coverage has fallen precipitously–from 61 percent in 1993 to 38 percent in 2008, according to the National Small Business Association. The result: Among small businesses, there’s more support than in the past for government action of some kind.

And this time around, the president and the Congress appear to be more willing to accommodate small businesses’ concerns. Even if Congress adopts an employer insurance requirement, chances are good it will exempt small businesses, although the size of the exempted companies isn’t yet known. House and Senate bills also are expected to make changes to both the individual and small group markets to help make health insurance more affordable.

It’s far too early to know the final shape of legislation, or what position the National Federation of Independent Business will take. The group, which has 350,000 members and strong ties to Republicans, still staunchly opposes an employer requirement.

But Small Business Majority, a California-based health care research and advocacy group that supports many of the Democratic proposals to overhaul the nation’s health care system, says political attitudes have changed. Chief executive officer John Arensmeyer says “there is much more openness to a system of shared responsibility as part of a fully reformed system.” The reason, he says, is rising costs: “it’s been universally recognized that small business is being killed by the existing system.”

To help consumers and businesses shop for coverage, Congress is likely to create an exchange, a health insurance marketplace. And it might provide tax credits to help small businesses buy insurance, and some type of subsidies for individuals. Based on their incomes, many small-business employees would likely be eligible for subsidies. Some lawmakers, for example, are talking about subsidizing people whose incomes are as much as 500 percent of the federal poverty line, or $110, 250 for a family of four.

“If you have an insurance exchange that individuals can go into and those individuals have subsidies…it kind of takes the onus off the small business person to offer insurance,” says Robert Laszewski, president of Health Policy & Strategy Associates, a consulting firm in Alexandria, Va.

For years, increasingly frustrated small business owners have struggled to find affordable insurance. To help cover costs, they have raised employees’ share of premiums, increased deductibles and co-payments, and sometimes withheld yearly raises.

England, owner of British American Auto Care Inc., has offered insurance since starting his business more than three decades ago. He currently provides insurance to 10 workers.

Last year, when his insurer told him his premiums for 2009 would rise by 20 percent, he switched carriers and offered his workers two options, a preferred provider organization and a health maintenance organization.

He pays the monthly premium and deposits half of the deductible amount in health savings accounts for employees. They have to pick up the rest of the deductible before the coverage kicks in. Most of his workers are enrolled in the HMO. Still, he says he’s facing a possible 24 percent increase in premiums for next year.

England says he’s willing to cover half of his employees’ deductibles because he thinks it will encourage the use of preventive care. As he walks past a car waiting for repairs, he points to the rear tire on the passenger side to underscore the importance of preventive care. A good technician, he says, will examine that tire for blemishes – a possible sign that the driver has hit a curb or something worse – and see if the tread is wearing evenly.

He supports individual and employer mandates, as well as a public plan, he says, because “everybody’s got to do their part” to make the system work better and hold down costs.

In St. Louis, Henderson says that premiums for his family’s construction-supply company, Dynamic Sales Co., Inc., have increased 159 percent since 1994. “I can’t pass those costs along in price increases to my customers or I’d be out of business, so that comes right off the bottom line,” he says.

He opposes requiring either employers or individuals to buy insurance. The requirement for individuals is “a toothless tiger,” he says, noting that millions of motorists fail to get accident insurance even though it’s a requirement. An employer mandate would only add to employers’ health care costs, Henderson believes.

Henderson pays 70 percent of the monthly premium for six employees while the workers pay the other 30 percent. He also contributes $100 per month, or $1,200 per year, to health savings accounts to help the workers meet their $1,500 yearly deductible.

He backs giving individuals a tax deduction for purchasing their own health insurance, saying employees should make the health insurance choice that’s best for them.

“Why is it an employer’s responsibility to provide you with something you need?” he asks. “I don’t provide your auto insurance, I don’t provide your life insurance, I don’t provide your homeowner’s insurance. So why am I providing your health insurance?”

He says he’s also sick of the yearly “cat and mouse game” of buying health insurance. “Starting about October, November, what kind of acrobatics, semantics do we have to do to make this happen? In the old days, everyone knew what their insurance policy was from month to month, year to year. And now it’s like what do we have this year? Some continuity would be really great.”

Jaclyn Schiff contributed to this report.