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Health insurance weighs heavier on small biz

A physician assistant examines a woman.

KAI RYSSDAL: As much of a pain in the you-know-what as it is to find good health insurance, it can be worse for companies. If they want to get and keep good workers, they'd better have a decent package. But just as for consumers, health insurance can be hard for employers to find and expensive when they do find it.

The smaller a business is, the bigger those problems become. So you might think entrepreneurs would have one well-defined message as the health care debate heats up. Like everything else with health care, it's not quite that simple.

Marketplace's Steve Tripoli is at the Entrepreneurship Desk. He's been following the health insurance challenge for those small businesses.


STEVE TRIPOLI: The bite of insurance costs is more dramatic when you see it directly from a small factory's floor.

Lincoln Precision Machining outside Boston makes hoists and winches for lifting things. The company struggles with costs and competition, but it's holding its own for now.

When I first visited the company in 1999 it had 26 employees. Health insurance coverage for a family cost $460 a month back then, and the company paid for all of it. Today, Lincoln's down to 22 employees and family health insurance premiums have tripled — they're nearly $1,500 a month now. And workers pay a share of that, about $300 a month.

Of course, this cost is growing far faster than Lincoln's profits. Richard Hallen, the company's vice president then and now, says the pain of paying it has been spread around.
RICHARD HALLEN: It comes in part from lower wages for the employees. I think it comes from lower profits for the corporation. It comes from trying to find new sources for materials.

On the shop floor longtime employee Rich Perduta says workers are resigned to both smaller raises and paying part of the insurance tab.

RICH PERDUTA: It's a tough pill to swallow but, you know, you really don't have any control over it. You know, I mean, the company's had to pay a lot more also, so what are you really gonna do?

Believe it or not, Lincoln isn't far from typical. Since 1999 small-business health insurance premiums have risen about 125 percent nationally. That's less than Lincoln's 200 percent but the company's aging workforce is the difference. Many small businesses get extra-large premium hikes as their workers age.

John Arensmeyer, who heads the advocacy group Small Business Majority, says small employers take an oversized health insurance hit in ways beyond price.

JOHN ARENSMEYER: Many times entrepreneurs can't get health insurance because they're too high a risk. If you run a small business and you get rated just based on yourself or a few other employees, you may be out of luck finding affordable insurance at all.

Despite these common problems the small business community is widely divided over a fix.

Gary Claxton surveys health benefits nationwide for the Kaiser Family Foundation. He says small businesses split among those that provide insurance and those that don't provide it or oppose potential insurance mandates for business.

Claxton sees national momentum toward broad-based plans like the new ones in Massachusetts and California, where businesses share the burden of insurance costs. But he warns that small-business support for such plans can quickly erode in the face of mandates.

GARY CLAXTON: There clearly will be some business opposition, because most of the proposals that we see do require businesses to do something.

Back in 1999 Richard Hallen at Lincoln Machining surprised me by saying that the country should eventually adopt universal health insurance — not a common view among executives. All the interest groups will fight for another 8 or 10 years, he said, and then they'll decide it's the least-bad choice. Well, he was wrong about the timing for universal coverage. But today he's sticking with his prediction of a national plan someday.

HALLEN: I do still think that's the most likely outcome. I don't see a real rational, or a real likely alternative to that.

John Arensmeyer at Small Business Majority doesn't see a government-backed, "single-payer" plan as the only option. But he says small businesses need a system that guarantees access to affordable health insurance.

ARENSMEYER: And if part of that system involves businesses paying a fair share, we think that's perfectly reasonable. If the society decides that the solution is a single-payer system, well then that's another way to go.

Of course that position's directly at odds with many other small business groups. And look around — big business, labor and others have their own divisions over health care.

Which should help you understand why major reform has been so elusive, big price hikes and all.

I'm Steve Tripoli for Marketplace.

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