It's that time of year once again when our nation's companies begin negotiating, or get told, how much health-insurance premiums will go up in 2010. According to a survey by the National Small Business Association published in September, 92 percent of its members expect an increase this year—the other 8 percent being delusional, I suppose—and the average are betting on a 13 percent rise. I'm thinking more like 18 percent for no other reason than that's what we've been hit with in recent years even though we are part of a large trade association that negotiates a group rate.
It remains an enduring mystery to me why my health-care costs rise in the high double digits each year while inflation putters around 2 percent. I only wish I had the market power to force such hikes on my customers. Instead, it is a cost we simply eat, unable to pass on, except to employees. The 150 people who work for our company pay about 20 percent of premium costs, which can run them up to $100 per month for a family. When we started premium sharing with our employees five years ago the share was half that. But it has grown each year despite our switching among lower priced plans that unfortunately hammer employees with high deductibles and copayments.
There is no little irony that the annual corporate renewal season corresponds with our government's efforts to craft a new health-care system. So far, the whole debate in Washington has driven me crazy. Even President Obama who obviously sympathizes with the cost burden health insurance places on small business seems out of touch. During his Oct. 3 weekly radio address, he insisted that reform needed to be passed now or "employers will pay 6 percent more to insure their employees next year—and twice as much over the next decade." Obviously, with health-care contracts being renewed now, and prices set, nothing can be done about next year. Given this basic lack of understanding, it is easy to be cynical about this sudden appeal to small business. Small business has had little input, and cost control has definitely taken a back seat to insuring more of the uninsured. While I accept this as a noble goal, it seems inconceivable that so much effort is being put into bumping the percentage of those insured in our country from 85 percent to 94 percent as the Congressional Budget Office predicts.
I find business owners I talk to pretty frustrated as well. "Do you really think health care will be better or cheaper than what we have now?" asked one skeptical machinery manufacturer I met at a trade show in Las Vegas on Oct. 6. "And we can't look to the government to save us. Just look at how out of control Medicare spending is." A bag manufacturer about the same size as my company worried that not enough was being done to contain costs. "I may have to do away with health insurance altogether if it keeps going up, and I don't think the reforms help," he said. "But is anyone listening to us anyway?"
The "us" he meant was small business. I know trade groups like the National Small Business Association have lobbied and testified before Congress. But it is hard to see that small business has had any impact. For instance, most legislation defines small business as companies with less than 50 employees. This stands in sharp contrast to the standard set by the Small Business Administration, which defines small business as manufacturing companies with less than 500 employees and nonmanufacturing firms with receipts of less than $7 million.
The definition matters. Most plans in Congress set employer mandates at 50 employees or more, with no tax credits going to companies that are larger. Small businesses will have to offer the same levels of coverage as companies many times larger, and they'll get no help to offset costs. The possibility of taxes on so-called high-cost insurance plans also could clobber small businesses like our family-owned packaging manufacturing business since we do offer fairly comprehensive coverage.
Meanwhile, like my friend in machinery manufacturing, I'm still trying to figure out how any of the plans out there control costs. There's no curbs put on malpractice lawsuits, one of the drivers of increases. The government plan has been scrapped in favor of health-insurance co-ops, institutions that allow small businesses to join together and buy insurance as a group, with supposedly lower premiums as a result. But co-ops already exist in states like Minnesota, and their success at keeping premiums from rising each year are, well, no better than my efforts.
There is no doubt something has to be done. A healthy percentage of the uninsured, about 46 percent, work for small businesses too poor to afford insurance. And poll after poll says that fear of not having insurance keeps would-be entrepreneurs working for companies rather than striking out on their own—an obvious detriment to innovation. Meanwhile, my costs continue to skyrocket each year, with little hope increases will ever end. This puts me at a competitive disadvantage against foreign competitors with state-run systems.
Last year our health-insurance bill jumped $140,000. We decided not to pass any of the increase on to employees since they were already being hammered by rising gasoline prices. We worried that bumping their costs up might force some good, well-trained employees to look elsewhere for work. But in order to cover that cost, we had to find either $2 million in new sales or the same in cost cuts. Otherwise, it came out of margin. I'll give you one guess how we covered the hike.
Today I am no more hopeful, reform or not, that our company's lot will change. I will still think twice about adding jobs when I know that I am not just taking on a new wage or salary, but high health-care costs as well. "How can you have a job recovery when you worry about such things," a small parts supplier of mine agreed. I don't know the answer. But I am pretty convinced those who should know in Washington aren't offering the answer either.