The No-Win Scenario for Small Businesses

by Tim Foley

categories: For Profit Insurance, The Uninsured and Underinsured

Published June 23, 2009 @ 10:57PM PT

At a meeting in New York City that I attended, Howard Dean talked about the problems faced by small businesses dealing with increasingly unaffordable health insurance this way:  “We really do nothing for small businesses – neither party ever does – but small businesses create 80% of the jobs in this country.”  (I’m paraphrasing from inexact notes).  That’s one of many reasons why small businesses have switched sides on the health care debate this time.  In the 1990s, they were determined to kill Clinton’s employer mandate.  Now, they’re desperate for relief from the no-win scenario of our broken health insurance system.

So it was that of all the testimonies delivered on this, the first day of hearings in the House for the Tri-Committee draft bill, I skipped over luminaries like White House advisor Christina Roemer, economist (and public plan theorist) Jacob Hacker, or physician development expert Dr. Fitzhugh Mullan.  The one I wanted to read and watch was ReShonda Young.

Ms. Young is Operations Manager for the family-owned Alpha Express, an Iowa-based transportation and contracting business.  They haven’t been able to offer health insurance for years – with bids starting at 13% of payroll, health care costs would be the cost equivalent of five additional employees.  That might be doable, but the insurance market for small business is only slightly less capricious than individuals.  Without the bargaining clout of a large employer or the capacity to spread risk out over a large number of people, small businesses are subject to the same whims over premium increases and pre-existing conditions that so many individuals face.  As ReShonda put it, “the plans we’ve looked at would mean at least a 12 percent increase in our payroll expenses.  And the plan would include a waiting period of 12 to 18 months before any pre-existing conditions would be covered, so the money we put out in premiums wouldn’t even cover some of the medical expenses we would incur.  We also had no guarantee the premium will remain stable from one year to the next, and in fact they could ratchet up the premium the second year and drive us out of the market again.”

If that doesn’t sound surprising, you also won’t be surprised to learn part of the reason for insurance to be so unpredictable – no one’s holding their feet to the fire.  “I received eight bids for coverage for our employees – but they were all from the same insurance company, Wellmark. In Waterloo-Cedar Falls and in most of Iowa, there are one or maybe two health insurers to choose from. That’s not competition, and it’s not giving us affordable choices.”   It’s the old “where else are you going to go?” conundrum.  As of right now, the answer is “nowhere.”

You hear a lot about how small businesses would get crushed by raising taxes on the wealthiest 1%, or how small business will be crushed by excessive regulations, or how small business would be crushed by a carbon tax or cap & trade.  But those same people who claim to stand up for small businesses disappear when we’re dealing with something that does crush small businesses – the no-win scenario of either letting the employees who feel like your family go without benefits, opting for the “split the baby” solution of getting a high-deductible or high cost-sharing plan that you know will be insufficient, or subjecting to yourself to the slings and arrows of outrageous insurance monopolies, where the only safe prediction is that your costs will go up.

(Photo credit:  House Committee on Education and Labor on Flickr.)