Healthcare biggest headache for small employers

Senator Ron Wyden

WASHINGTON (Fortune Small Business) -- The cost of health insurance continued its 20-year reign as the number-one issue worrying small-business owners, according to the latest edition of the Small-Business Problems and Priorities survey conducted by the National Federation of Independent Businesses, released on Monday.

That finding underscored the NFIB's intense spotlight on health-care issues at its annual summit, being held this week in Washington, D.C. Two senators and a congressman took the stage Monday afternoon for a panel on the current state of healthcare legislation, moderated by former senator Bob Kerrey.

For the first time in decades, a bipartisan coalition is pushing for drastic reform, said Sen. Ron Wyden (D-Ore.), co-author of a universal healthcare act co-sponsored by 14 senators, including seven Democrats and seven Republicans.

"We have gone at this for a number of years," Wyden said. "This time, though, I think there really is the chance to thread the needle. Fourteen U.S. senators want to work with a new president in 2009 to finally do what we set out to do more than 60 years ago."

Wyden's bill, the Healthy Americans Act, is one of several bills jockeying for position on the legislative calendar. Also in the running is the Small Business Health Options Program (SHOP), a newer, more limited Senate bill aimed at helping small businesses achieve scale economies by banding together to create purchasing pools.

SHOP would also introduce tax credits for sole proprietors and for small companies that provide health insurance for their workers.

The NFIB has endorsed SHOP, and Kerrey pressed the organization's members to hold their Washington representatives accountable for moving the bill along toward committee markup and an eventual vote. SHOP co-author Sen. Blanche Lincoln (D-Ark) said she doesn't anticipate that happening this year:

"I've continually asked for a markup," Lincoln said. "We don't do anything quickly up here. I do believe marking something up in committee is important. It's not going to go to the president's desk in this cycle, but it shows the president that there is bipartisan will to get something done."

Both Lincoln and Wyden expressed hope that a Senate push for health-care overhaul will encourage the next president, be it Democrat Barack Obama or Republican John McCain, to make the issue an early priority.

"You need the presidential bully pulpit," Wyman said. "We want to get it ready so that a new president says, 'There is something to work with here.'"

Numerous small-business owners attending NFIB's annual summit say reform can't come soon enough. In an instant poll conducted during the health-care panel, 72% percent of the audience said they've had to limit employee healthcare options because of high costs; 66% said they think it will be "extremely difficult" to keep up with costs over the next few years.

Behind the statistics are entrepreneurs with personal stories of the heavy costs, both financial and emotional, of a dysfunctional health-care system.

Quick Prints owner Margaret Remy recently lost two longtime employees who quit their jobs at her Meridian, Miss., imaging shop because they developed health problems and needed coverage that she couldn't provide.

In business for 23 years, Remy has never been able to find affordable insurance for her small handful of employees. Both Remy and her staff rely instead on public programs such as Medicare and on coverage provided by spouses. Some of her employees simply go without coverage.

Faced with the daunting task of hiring and retraining replacements for her departing staffers, Remy says she's frustrated professionally and personally.

"They were with me five or six years. We were like a family," she said. "I'm disappointed that I was not able to meet their needs."

GHH Real Estate Services owner Curt Green provides no coverage for his 30 employees -- though not for lack of effort.

"We keep trying to get coverage. Every time, we run into a brick wall," said the Texarkana, Texas, real-estate developer.

Big companies are able to spread the high cost of some employees' chronic and acute health issues across large pools of workers. Smaller companies, unable to mitigate their risks, face sharply higher premiums to insure their smaller employee pools.

A multiyear study released in April by the nonpartisan Kauffman-Rand Institute for Entrepreneurship Public Policy found that from 2000 to 2005, the median cost of health insurance relative to payroll jumped 44% for companies with fewer than 25 employees -- more than the 40% median increase borne by firms with more than 100 workers.

Meanwhile, small firms typically had access to lower-quality health-care plans than did bigger enterprises, the researchers found.

Like Remy, Green is a fan of the SHOP bill: He thinks tax credits would help stem some of the pain of exorbitant insurance costs. But he really wants employers to be removed entirely from the health-care equation.

He argued that the current system forces small-business owners to take time away from their core business to deal with policy and bureaucracy outside their expertise, he argued.

"I pour concrete. I can't fill out insurance forms," Green said.

Health-care reform is among the NFIB's top legislative priorities right now. In March, the organization launched an extensive lobbying campaign dubbed "Solutions Start Here," which incorporates discussion forums around the country.

The NFIB plans to use the stories and ideas business owners bring to those forums to spotlight the urgency of the health-care crisis. NFIB CEO Todd Stottlemyer said it's the largest and most aggressive advocacy campaign in NFIB's 65-year history.

NFIB is also a key backer of "Divided We Fail," a health-care lobbying coalition created by unusual bedfellows NFIB, the American Association of Retired Persons, the AARP, the Fortune 500-filled Business Roundtable and the Service Employees Union.

Still, any significant revamp remains years away, the Congressional leaders assembled at NFIB's Monday panel acknowledged. They're hoping for legislative action in 2009 at the earliest.

Meanwhile, business owners such as Gordon Whitbeck, president of the Whitbeck Group chemical analysis firm in Springdale, Ark., will carry on patching together health-care coverage for their staff however they can.

Whitbeck estimates that he spends 5% of his company's revenue on health insurance for the four of his eight staffers who were able to buy it. The other four employees, some of whom have preexisting medical conditions, have so far been unable to find. any affordable coverage.

"I think the system will change, because it has to change," Whitbeck said.