Small business, big downside

Bob Moon Oct 13, 2006

KAI RYSSDAL: There was a report out this past week that could be seen as a testament to America’s entrepreneurial spirit. The government says small businesses now employ better than half of all workers in the private sector. Not too long ago most of us worked for big companies. There is something though that the Small Business Administration’s report didn’t point out, but we will: Americans who work for those smaller firms are a lot less likely to get health coverage. Marketplace’s Bob Moon looks now at some of the hurdles the firms that do offer benefits have to deal with.

[ Radio commercial: Reporting live from the field and when I say field, I mean . . . (goat bleats) . . . field. ]

BOB MOON: This is a radio commercial Paul Travitzky and his wife Theresa have been using to promote the new business they’ve been building on their goat farm outside Montgomery, Alabama.

[ Commercial continues: Goat milk soaps and lotions. The results are amazing. Isn’t that right, Billy? (goat bleats) ]

Sales have been so good, they’re planning to hire on some help. And Travitzky is convinced that taking care of his workers will be the only way to make sure they take care of business. He’s determined to provide health care benefits, even though he knows it’ll be expensive.

PAUL TRAVITZKY: It’s either you deal without it and pray that nothing happens or you get it and pray that you don’t go broke.

Travitzky began his search for employee health coverage on the Internet.

TRAVITZKY: I typed in ‘small business health and dental insurance’ on Google just to see what would happen and it came up with 11,200,000 links so the choices are out there but you really need to do your research. That’s the only thing I could suggest to anybody is, research, research, research.

That seemingly long list of choices can also be misleading. The rules vary state by state. In some places, there are limits on the minimum number of employees needed to participate in a health plan, for example.

And Kaiser Family Foundation researcher Gary Claxton says even if a small business can afford the high cost, many are scared off by the relentless rise in premiums: 87 percent in the last six years:

GARY CLAXTON: They’re not sure they can offer it and keep up with it and that kind of uncertainty probably keeps them out of the market in the first place

Maryland real estate executive Adam Cockey chairs a panel that’s dealing with the issue for the National Association of Realtors. He says in too many states, there’s little to no competition.

ADAM COCKEY: Small business people pretty much have to take that which the carrier is willing to bring you.

The National Association of Realtors has joined with other groups trying to win passage of a bill to promote Small Business Health Plans or SBHPs. The legislation has repeatedly won House approval but failed to clear the Senate again this year. Amanda Austin of the National Federation of Independent Business says the plan would help level the playing field for small businesses:

AMANDA AUSTIN: Large employers out there today have the ability to negotiate on behalf of a larger pool and that’s something that we would like to do. I think when you see a small business that has five employees negotiating on a plan, I don’t think it s the same as a large employer that has a thousand or two. They may get a better rate and that’s kind of what we’re looking to do.

Some say it could take years for the idea to win a Congressional seal of approval.

But insurance consultant Alicia Sutton says there are options for small businesses in the meantime. Her firm in the Washington, D-C area is promoting Association Health Plans…which she says are the same idea.

ALICIA SUTTON: Once they are passed through Congress then I think you’ll see an outpouring of insurance companies willing to offer this but until that time, employers have to find association health plans that are offered through their associations. They have to kind of petition, are you going to get these: Can we work with you to find one?

Sutton says local Chambers of Commerce can be one place to look for such plans.

None of these ideas guarantee that premiums won’t keep going up, of course. And that can leave small businesses with some tough choices even if they HAVE found coverage.

David Richard runs a Web site design business in Virginia. He says his rates rose around six percent in the last year, and 10 percent the year before.

DAVID RICHARD: It is certainly outpacing inflation. And I’m sure that if it continues to rise we might have to make some tough decisions as well, whether it be going to a lesser plan, you know one that may not cover as well, or we do what a lot of companies do and that’s offset it with employee contributions.

Richard says he’s determined to hang on to some kind of health care benefit, because when it comes to running a small business, he’s an employee too.

In Los Angeles, I’m Bob Moon for Marketplace Money.

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