Small business is grappling with a huge problem: health care for employees
This article first appeared in the St. Louis Beacon, July 21, 2009 - As a second-generation business owner, Jim Henderson, president of Dynamic Sales of St. Louis, knows all about supplying contractors with everything from extension cords and safety goggles to all manner of steel fasteners -- screws, bolts and clamps.
And by necessity, he also knows plenty about researching and negotiating health insurance for his six-employee company. As the national debate about health-care reform grows more heated, Henderson has his own deeply held opinion about the role employers should play.
"I think the time has passed that small businesses should be required to provide health insurance," he said. "I don't provide your auto insurance. I don't provide your homeowners insurance. Why should I be providing your health insurance?
"You can go out and find a policy -- if we can get changes in the laws -- that best suits your needs instead of having to deal with a policy that best suits the company's needs financially."
For now, though, Henderson's company still provides employee health coverage, and the tales he relates of ever-increasing rate hikes and never-ending negotiations with insurers have a universal ring.
"We've seen our rates go up 159 percent in the past 11 years," Henderson said during a recent telephone news conference on small business and health care arranged by the Missouri Foundation for Health. "The amount of time that I have to spend sorting all this, wading through proposals, having employees fill out new surveys to see if the new company will process through their underwriting department. It's crazy."
To keep costs down, Henderson said his company, which has been in business for 43 years, has tried the same solutions tried by everyone else: increased deductibles and increased employee contributions while coverage continually erodes.
"The disturbing point of all of this is that throughout that time period there's been very little change in our census -- no major claims or losses. Just insurance rates going up. And when I ask the companies, 'Why are you raising our rates?' the response is,' Because we can.' "
Henderson wants out of the health-care business -- a position he politely voiced while participating in the July 8 rollout of a survey of Missouri small business owners sponsored by the foundation. As one of three small business owners invited by the foundation to share real-life experiences, Henderson made a point of separating himself from a key survey finding: that 58 percent of small business owners in the state believe their companies have a responsibility to offer health insurance.
Henderson, who was not among the 200 small business owners polled, would have answered that question differently.
"I noted in some of the introductory comments that 60 percent of small businesses say they should provide insurance," Henderson said during the question-and-answer segment. "I guess you'd have to count me in the 40 percent."
The impact on small businesses
While the debate over health-care reform seems to have something for everyone to disagree on, there is little argument that the nation's small businesses have borne a major brunt of years of rising health-insurance costs.
That impact is a crucial point in Missouri, where nearly 54 percent of residents receive their health coverage through employers -- and where nearly 96 percent of employers are small businesses with fewer than 100 employees, according to the Missouri Foundation for Health.
As more and more employers find it impossible to afford coverage for their employees, employed workers have become the fastest growing segment of uninsured workers in Missouri, said Dr. James R. Kimmey, who heads the foundation. The organization recently contracted with the Small Business Majority, a small business advocacy group, to research issues affecting the state's small employers.
"We feel that the current discussion on health-care reform will be enriched by having some up-to-date information on small businesses -- how they're impacted by the health-care system, as it is now, and what kind of changes they would like to see in health-care reform that's moving forward in Washington," Kimmey said during the conference call with media outlets to share the survey's findings.
According to the survey, which was taken statewide in late May:
- Fewer than half of the respondents -- 46 percent -- offer health insurance.
- Of those who don't offer coverage, 89 percent said it was because of the cost.
- 72 percent of those who do offer insurance say they are struggling to afford it.
In addition to Henderson, Gina Eaton, co-owner of Tiger Transportation in St. Joseph, and Becki Geraty, co-owner of St. Louis Composting, participated in the conference call and related similar troubles with insurance costs.
Eaton said that rising premiums and deductibles had forced her company to drop health coverage for its five employees. And, like 69 percent of survey respondents, Eaton said she would support having the option of a private or public health-insurance plan.
"I think people would be more apt to start a small business if they had a public plan available," she said.
Geraty said her 45-employee firm was hit with a 36 percent hike for medical coverage last year.
"The problem is we have grown pretty quickly and we also have a tendency to hire people with experience and most of those people are going to be older," she said.
Geraty said she wants healthy employees, but she can't afford to continue to absorb 36 percent rate increases -- and her employees can't afford their higher shares of coverage costs.
The survey found substantial support in Missouri for the establishment of a health insurance pool to create a marketplace in which small businesses and individuals could choose their coverage. Seventy-six percent of respondents said they would support such a pool that would provide a large choice of plans, transparency of information and bargaining power to negotiate deals with providers.
The survey also found that 82 percent of respondents supported the elimination of restrictions on buying health insurance based on health status or pre-existing conditions.
Who's responsible for coverage?
John Arensmeyer, founder of the Small Business Majority, said the Missouri research was done as part of a five-state Midwestern survey that included Iowa, Nebraska, North Dakota and Wisconsin. In Missouri, 46 percent of respondents were Republican, 21 percent Democratic and 26 percent independent.
Asked about the relatively small sample size and the survey's margin of error -- 6.9 percent -- Arensmeyer said he was confident in the findings, which were consistent with those in other Midwestern states.
In general, Arensmeyer said, the survey found support for many reform proposals being debated nationally.
Arensmeyer and Ryan Barker, a health policy analyst with the foundation, said the survey also indicates that Missouri small business owners want to be part of the solution:
- 59 percent of Missouri respondents said that employers, individuals and the government should share responsibility in making health care more affordable.
- 55 percent believe that businesses that don't offer health insurance should be required to pay something to cover their employees -- the so-called employer mandates.
But it was those numbers indicating support for shared responsibility and employer mandates that prompted Henderson to make clear his position that it's time for small business owners to get out of health insurance altogether.
Henderson believes the best solution lies in the free market. He points to Lasik eye surgery as an example of how competition brought down the cost of the procedure, as consumers became informed and shopped around.
Instead of paying for medical coverage, employers could enhance their pay packages, he said.
"We have to be competitive," Henderson said. "We have to offer pay packages that attract people."
During a later interview with the Beacon, Henderson said he doesn't believe the solution to his company's coverage problems will be solved by mandating employers to provide insurance or contribute a percentage of their payroll to a fund. And he does not support a single-payer or public option.
"I don't like the idea that if small business isn't providing it, then we are going to pay into a pool to help fund that health insurance. I think that one of the ways to help get it under control is the free market," he said.
Henderson's response during the news conference prompted Geraty to agree that it might be time to get out of the insurance business. In addition to costs, she cited the time it takes and the private information she has to know about her employees.
"I'm not real fond of having to provide health insurance, mainly because it's a huge administrative nightmare and, secondly, I feel like I know things privately that I just don't want to know," she said. "And you have to know these things if you're going to manage your health-care program in a reasonable fashion."
Geraty said she isn't convinced that a single-payer plan is the best option because she wants to know that her employees have good health coverage that is reasonably priced -- and that they are informed consumers.
"If I lived in a perfect world, I would have my employees be responsible for their health insurance," she said. "They could do that for themselves; they don't need me getting involved in that part of their lives. As an employer that is not my purpose."
Kimmey concluded that it is important for small business owners to have a place at the table regarding health-care reform.
"The results of this survey show that small business owners are not all of one opinion, obviously, but that they support reform. That they would like the reforms to retain choice. They would like the reforms to guarantee coverage to their employees in one form or another, whether it's in a free-market model or a single-payer model, or whatever," he said. "In the end, the survey supports where the foundation has been and that is, 'We need a system that provides guaranteed affordable choice to all Americans.' "
Who is the Small Business Majority?
In a later interview, Henderson, who belongs to the Missouri chapter of the National Federation of Independent Business, again questioned the survey's findings that small business owners in Missouri support health-care mandates. He said his organization regularly polls its members and has found overwhelming opposition to such proposals.
The National Federation of Independent Business identifies itself as a nonprofit, nonpartisan group. It tends to lean Republican.
Some business bloggers, including one for The New York Times, have questioned whether the Small Business Majority has a partisan agenda, noting founder Arensmeyer's past support for Democratic candidates.
The Missouri Foundation for Health referred questions about the survey to the Small Business Majority.
Rachel Radway, communications director for the Small Business Majority, confirmed that the organization has no membership, which she said better enables it to conduct nonpartisan research. She also disputed concerns over Arensmeyer's political ties, saying that other leaders of the organization have supported Republican candidates. The group's major funders are Blue Shield of California Foundation, the New York State Health Foundation, the Nathan Cummings Foundation, the California Endowment and the Public Welfare Foundation.
Radway said the group stands behind its findings in Missouri, despite the 6.9 percent margin of error. With that margin, for example, the 55 percent of respondents who said they would support employer mandates could range from below 50 percent to above 60 percent.
"We decided that polling smaller groups in many individual states would provide more useful information to legislators about small business owners' opinions in their own states," according to Radway. "For economic reasons, we couldn't poll several hundred people in each state, but again, when you look at the regions we surveyed -- the Midwestern sample alone was 1,000 people -- you'll see lower margins of error."