COLUMBIA — Small businesses make up 80 percent of the membership at Columbia Chamber of Commerce, and their owners have one major frustration in common: rising health care costs.
In the 20 years that Don Laird has been with the chamber, he says he has only seen health care prices go up, up, up for employers.
"The percentage of health care increases is higher than the cost of living increases," said Laird, who now heads the chamber. Over those 20 years, small firms have seen health care costs go up 5 percent to 20 percent, he said.
Small businesses account for 74 percent of Missouri’s businesses, but only 43 percent of them offered health coverage benefits in 2008.
In Columbia, small-business owners are closely watching the progress of health care legislation as it makes its way through Congress. "The main concern for them is what could be the offer and at what price," Laird said.
Some small-business owners say health care reform will raise insurance premiums. Others say the private insurance industry needs the bill’s reforms, which would end practices such as denying people coverage based on pre-existing conditions. There is some support for government-run health insurance exchanges, which could rectify the problem.
The Columbia Chamber of Commerce hasn’t taken a position on the bill passed by the U.S. House “because there’s so much in limbo and going back and forth in negotiations,” Laird said.
Under the current health care system, small businesses have to deal with high broker fees, fixed administrative costs, and the phenomenon of "adverse selection" where people who are less healthy choose more generous plans, the Council of Economic Advisers said in a report.
These factors force small businesses to pay up to 18 percent more per worker than large firms pay for the same health policy, the report states.
Some of these costs are passed on to small-firm employees in the form of lower wages, and some of the costs diminish the profits of small businesses.
The 1,990-page proposal for a $1.8 trillion health care overhaul from the House of Representatives is the first step toward a long process of evaluation. The Senate consolidated its proposals and the House bill into the 2,074-page Patient Safety and Affordable Care Act that is estimated to cost $848 billion. The new bill is under debate and will have to be passed by each chamber of the Congress. The legislation would then go to President Barack Obama for his signature.
The House provisions that would affect small businesses include:
- a proposal to create health insurance exchanges
- an employer mandate that would require business owners to provide health coverage to their employees
- tax credits for businesses that provide insurance
- a tax increase on
businesses to help offset the bill’s costs
The Senate bill proposes various new taxes to pay for the reforms.
Public option in health care exchanges
The proposed insurance exchanges would allow individuals and businesses to compare insurance plans, including a government-run plan, before buying one.
Ilalyn Irwin is one of the three
managing partners of CURA Advantage, a health care consulting company
in Columbia. Because the company is small, she said the firm cannot afford to
offer a group health insurance policy.
Irwin believes that a hybrid public option would help small businesses and the self-employed. The hybrid option would be similar to what Congress and federal employees have, where the health plans are private but the program is overseen by the government or administered through a nonprofit organization.
Current government programs such as Medicaid and Medicare have substantially lower overhead costs and higher standards of quality than private programs, Irwin said. "The inability of small business and the self employed to negotiate rates or afford coverage for their employees is an huge impediment to innovation and small-business start-ups."
The public plan, however, has met with significant opposition. According to the U.S. Chamber of Commerce Web site, a public plan would drive private insurance plans out of competition. More than 96 percent of the Chamber’s members are small businesses with 100 employees or fewer. The Chamber takes the view that people will prefer the public option because premiums would be much smaller than those offered in private plans, which coulddrive workers to abandon employer plans in favor of the public plan.
The public option would also be an unfair competitor because it would not reimburse doctors and hospitals fairly, the Chamber says. "Ultimately no viable private plans would remain."
Calls to the Chamber's national office in Washington, D.C., went unanswered.
A report on the Congressional Budget Office Web site says 30 million Americans would be covered through the exchanges, 6 million of them opting for the public plan, by 2019.
Some surveys envision a different scenario because people would still prefer private options. The Rasmussen Reports media company found that 51 percent of voters fear the federal government more than private insurance companies.
Some people are skeptical that the public plan would cover everyone. Laird fears workers might find it hard to access the public option. He said the government can create criteria to exclude people depending on the risks associated with the type of employment, on women of child-bearing age or on older males.
Others see the public option as a way to bring about a change in the way insurance companies now operate.
Concerns of small-business owners
The exchange is a way for small businesses to have access to affordable coverage, according to the U.S. Small Business Administration. Hayley Matz is a press officer at the federal agency who traveled to 25 cities in the past six months to listen to what employers have to say about the reform.
She said one small-business owner in Connecticut told the federal team that he lost a long-time employee to another company that will pay less but provide health care. Situations like that, heard around the country, demonstrate the need to provide small businesses an affordable health care option, Matz said.
But losing workers to another company over health benefits would only be an issue when an employer does not offer any benefits, said Sahba Jalali of Columbia. His Advanced Vision clinic employs six full-time workers. All of them have the option to receive competitive health benefits, but some opted out, Jalali said. Referring to the health care reform debate, he said he wants to see health coverage for people who don't have access to it, and he is curious as to who will pay for the reform.
Reform in the way insurance companies function now is much needed, said Kevin Kelly, owner of ChemPlus. His sole proprietorship supplies software to environmental analysts in the contract testing and food sectors.
Elimination of pre-existing conditions will be one of the benefits, he said. Kelly pays almost $4,000 in health care premiums every year.
"The deductible is so high, all I get, at most, is maybe better rates for medicines and doctor visits than what you get off the streets," Kelly said.
Early this year, he tried to change his insurance provider, which he said he had for six years, but Kelly was turned down because of a genetic health condition called hemochromatosis. This condition causes the body to absorb fatal doses of iron.
Referring to the insurance plans, he said, "They wanted to eliminate a wide range of conditions in return for a smaller premium." Kelly also expressed concern that his insurance could be canceled if he ever got very ill and needed extensive medical care. "Medicare sounds like a great deal to me, but I'm too young for that."
The House bill also proposes that employers with annual payrolls of $500,000 or more provide health insurance to their employees or pay a payroll tax of up to 8 percent. The Senate version of the bill says employers with fewer than 5o workers will not be penalized for electing not to provide health benefits.
"The general feeling in small businesses is that they should not be told what to do by the government," Laird said.
Michele Spry, president of Midway Electric Inc. echoed that feeling. "We should be able to pick the best option available for our company and our employees," she said. "You should be able to pick what you want rather than the government choosing for you."
That way, Spry said, each small business can customize its health coverage according to the needs of the workers and the owners. Midway Electric offers health insurance to all of its 14 full-time employees, but two of them have opted out of it.
To encourage employers to provide coverage for their employees, the House Leadership Bill proposes tax credits be extended to some small businesses for two years.
Tax credits will not be available to employers who pay more than $80,000 in aggregate compensation for employees in a year.
"You are knocking out a significant number of people there itself," Laird said. And tax credits will only work if you are making money, he said.
The government should offer more incentives for small businesses, Spry said, stating that she supports the idea of giving tax credits. "But I don't think the economy will turn around in two years," she said. Spry wants to see tax credits for small businesses extended for five to 10 years.
Spry fears deductibles and co-pays for the health plan that her company offers will increase if the House version of health care reform becomes law.
The company's 12 employees who have opted for the benefits receive dental, accidental death and dismemberment, long-term disability coverage and life insurance. They have a co-pay of $15 in-network and a deductible of $1,000 a year only if an employee gets tests such as an MRI. Spry said she fears the company might not be able to continue to pay for such coverage if taxes rise significantly.
The National Federation of Independent Business said the Senate’s Patient Protection and Affordable Care Act will create “new taxes, a rich benefit package that is more costly than what they can afford today, a new government entitlement program, and a hard employer mandate, which together would cripple small businesses.”
Lynn Wobig employs four people at Wobig Insurance Group Inc., and she said she can't afford to provide health care benefits to any of them. She said she doesn't support any of the proposals because she thinks they would be detrimental to small businesses.
"Health care is a personal choice," Wobig said. "It is not my responsibility to make sure other people get health care benefits."
Impact on a health care economy
The reform's effects on economies dependent on health care are seldom talked about. The recession has already affected this sector with lost revenues because of less demand for elective care, more patients defaulting on their medical bills, losses in investment income and cuts in state and federal health care funding, according to a Robert Wood Johnson Foundation report.
One of Columbia's major employers is MU Health Care. But several small businesses are in health care, too.
"We, as a community, are very dependent on health care businesses, and many of them are small businesses," Laird said. Local small businesses in this sector include doctor's offices, laboratories and therapists.
Health care reform could affect these businesses' bottom lines, but it's not clear yet whether the effect will be positive or negative. More people with coverage could translate into more health care workers. But an effort to lower the federal government's overall costs could translate into cuts in services, and that could affect small businesses that provide health care services. At the same time, small businesses might be forced to spend more on health care.
Several factors will impact small businesses in Columbia in ways that are hard to determine before a final bill is adopted, Laird said.