Small business divided over requiring employer health care

Kaiser Health NewsJune 16, 2009 

WASHINGTON — 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. Both want the government to do something, sooner rather than later.

"This system is so screwed up," England said. "They've got to fix it."

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 penalties. 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.

Henderson, 45, whose family owns a construction and industrial supply business in St. Louis, wants a drastically different approach. He said the government should stop stifling the market, by lifting the prohibition against buying insurance across state lines. Greater competition, he said, 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 said. "It muddies up 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 administration's plan, partly because it included an employer mandate.

Since then, health costs have risen sharply. The proportion of small businesses that offer coverage also has fallen precipitously, to 38 percent last year from 61 percent in 1993, according to the National Small Business Association.

The result: Among small businesses, there's more support than there was in the past for government action of some kind.

This time, the president and Congress appear to be more willing to accommodate small businesses' concerns. Even if Congress adopts an employer insurance requirement, chances are good that it will exempt small businesses, although the size of the exempted companies isn't known yet. House of Representatives and Senate bills also are expected to make changes to 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 opposes an employer requirement.

Small Business Majority, a California-based health care research and advocacy group that supports many of the Democratic proposals to overhaul the health care system, said that political attitudes had changed.

Its chief executive officer, John Arensmeyer, said: "There is much more openness to a system of shared responsibility as part of a fully reformed system." The reason, he said, 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 a health insurance marketplace. This exchange might provide tax credits to help small businesses buy insurance and some type of subsidy for individuals. Based on their incomes, many small-business employees probably would 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," said Robert Laszewski, the 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've raised employees' shares of premiums, increased deductibles and co-payments, and sometimes withheld yearly raises.

England, the owner of British American Auto Care, has offered insurance since he started his business more than three decades ago. He now provides insurance to 10 workers.

Last year, when his insurer told him that 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 premiums and deposits half the deductible amounts in health savings accounts for employees. They have to pick up the rest of the deductibles before the coverage kicks in. Most of his workers are enrolled in the HMO, which also has a deductible, unlike some HMOs. Still, he said he was facing a possible 24 percent increase in premiums for next year.

England said he was willing to cover half of his employees' deductibles because he thought it would encourage the use of preventive care. He supports individual and employer mandates, as well as a public plan, he said, because "everybody's got to do their part" to make the system work better and hold down costs.

Henderson said that premiums for his family's construction-supply company, Dynamic Sales, had 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 said.

Henderson pays 70 percent of the monthly premiums for six employees; the workers pay the remainder. He also contributes $100 a month to health savings accounts to help the employees meet their $1,500 yearly deductibles.

He backs giving individuals tax deductions for purchasing their own health insurance, saying that employees should choose the insurance that's best for them.

"Why is it an employer's responsibility to provide you with something you need?" he asked. "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?"

(Jaclyn Schiff of Kaiser Health News contributed to this article.)

(Kaiser Health News, an editorially independent news service, is a program of the Kaiser Family Foundation, a nonpartisan health care policy research organization that's not affiliated with Kaiser Permanente.)

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