Small business, big health insurance issues
TESS VIGELAND: If you own or want to own a small business and are planning to provide health insurance, beware of the triple whammy. Small businesses pay more from the start for health insurance. Their premiums go up faster. And all that hinges on being able to get the insurance in the first place.
So, what’s a small business person to do? We wish we had a great answer for that. But Steve Tripoli at the Marketplace Entrepreneurship Desk can at least tell you what you’re up against.
STEVE TRIPOLI: I’ve been watching one small business’ health insurance struggles for years. Following them over time makes you realize just how big a headache this struggle can be.
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 in 1999, Lincoln 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 workers and family health insurance premiums have tripled to nearly $1,500 a month. And workers have to pony up a share now — about $300 a month. Wages, profits and even suppliers have been pinched to pay the bill.
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 don’t 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 makes for extra-large premium hikes. Many small businesses face that.
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: The bigger problem is that many, many small business people don’t have access to affordable insurance. 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 at the Kaiser Family Foundation says small businesses split among those that provide insurance and those that don’t provide it or that oppose potential insurance mandates for business.
Claxton sees national momentum toward broad-based plans where more businesses share the burden of insurance costs. Massachusetts and California are trying that route. But he warns that small-business support for such plans can quickly erode in the face of government mandates.
GARY CLAXTON: When you get into the details that broader support tends to get a little more shallow. And it is generally true that small businesses are not very trusting of government to come in and make a marketplace better.
But that’s not always true. Back in 1999, I spoke with Richard Hallen at Lincoln Machining, and he’s still the company’s vice president. Hallen said back then that the country should eventually adopt universal health insurance. Not a common view among executives. He predicted it would emerge as the best option after eight or 10 years of hard fighting among interest groups.
Well, he was wrong about the timing for universal coverage. But today, he’s sticking with his prediction of a national plan some day.
RICHARD HALLEN: I don’t see a real rational or a real likely alternative to that.
John Arensmeyer at Small Business Majority doesn’t see so-called “single-payer” national insurance as the only option. But he says small businesses need some 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. Which should help you understand why major health care reform has been so elusive — even with all the big price hikes.
I’m Steve Tripoli for Marketplace Money.
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