Small business owners are caught between a rock and a hard place on health insurance reform.
Under the current system, small businesses will see their premiums increase by as much as 20 percent next year, with the average increase around 13 percent — more than five times the expected rate of inflation, according to a new survey by the National Small Business Association (NSBA).
The survey findings are in line with insurance premium increases between 2000 and 2005, according to the Kauffman-RAND Institute for Entrepreneurship Public Policy, a California research group. It found that the median cost of health insurance for businesses with fewer than 25 employees rose 43.5 percent during that time.
Small businesses that don’t offer insurance realize that they are at a competitive disadvantage when it comes to hiring and retaining top employees. Yet 89 percent of firms without health insurance have no plans to offer coverage in the next year because it’s too expensive. If it were affordable, however, 63 percent say they would offer it.
Not surprisingly, a strong majority, 61 percent, thinks reforming the current system is important, according to the NSBA poll. But an even bigger majority, 73 percent, is opposed to being required to contribute financially to their employees’ health plan or to pay some kind of fee if they don’t.
In contrast, a Thomson Reuters poll found that 63 percent of Americans surveyed are willing to pay for health care reform if it delivers quality care at an affordable cost.
In other words, small business owners want reform, but they are unwilling to pay for it. Is this realistic? Hardly, but it is indicative of the disconnect that exists among small business owners on the health care issue.
Keith Ashmus, NSBA chair and co-founding partner at Frantz Ward LLP in Cleveland, summed up the issue with the release of the study. “The key is enacting reform that won’t make costs go up — reform that guarantees access, affordability, and quality while ensuring American small businesses are no longer at a competitive disadvantage,” he said.
While everyone can agree on those goals, the question is how to change the current system to achieve them. The Obama administration’s much debated and disparaged “public option” is one of the president’s answers to controlling costs and fostering competition, along with health care exchanges and tax credits. But the president has done a poor job convincing people his plan will work.
In addition, conservative lawmakers and right-wing organizations have done all they can to demonize a role for government in the health insurance market, even though the government has been a big player for years through mandates and by providing huge tax breaks to employer-sponsored plans.
As a result, only 35 percent the 3,003 respondents in the Thomson-Reuters poll believe that Obama’s reform agenda and the debate in Congress will lead to better health service.
Polling in the Reuters survey began September 8, the day before the president’s national address, and ended on Sept. 17. It also followed a summer of angry — and some say staged — protests at political town hall meetings across the country.
This issue reached a key watershed this week when the Senate Finance Committee voted down the public option, raising some questions about whether it can be revived when the legislation hits the Senate floor.
Without the option, what’s left is a package of “reforms that are mere trite extensions of what the U.S. government has been doing for decades,” wrote Holman W. Jenkins, Jr., this week in a commentary in The Wall Street Journal.
But the public appears to have had enough time to sort through the political rhetoric, according to yet another survey released in September. The Kaiser Family Foundation found that “public support for health reform ended its summer slide, reversed course, and moved modestly upwards in September.”
The Kaiser survey, its sixth on the issue, also found that 57 percent of Americans believe tackling health care reform now is “more important than ever,” up from 53 percent in August.
“Opinion in the coming months is hard to predict, but as the focus shifted from the town halls and hot-button issues to the president, the Congress and the core issues in the legislation that affect people the most, the summer downturn in support was largely erased,” Kaiser Chief Executive Drew Altman said in a statement.
The government insurance option is far from dead. Even if the final Senate reform bill doesn’t include it, there is ample support for it in the House, which is likely to pass a public option in its version of the legislation. That will require lawmakers to work out their differences in a conference committee.
Another key Obama component, so-called health insurance exchanges, are designed to help level the playing field between large and small businesses by giving small firms purchasing power and a range of options to choose from, which most don’t have now. The public option would play a key role in an exchange by setting a benchmark against which other private plans could compete and be measured.
The other big uncertainty about the Obama plan is its cost and how much small businesses would have to pay. As the National Federation of Independent Business argues, “The devil is in the details.”
There’s a good reason why small businesses are sensitive to costs. Employee health insurance is already driving, or influencing, their business decisions.
Of those companies that are providing employee insurance, 61 percent said rising premium costs would likely force them to eliminate pay raises in the coming year. And 31 percent said they have held off hiring new employees. More disturbing, one in five businesses, or 19 percent, said they were forced to lay off an employee, according to the NSBA survey.
It’s clear the current system is unsustainable. But the president needs to do a better job of detailing his proposal if he hopes to win over skeptical small business owners.