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PRESCRIPTION FOR HIGH HEALTH CARE COSTS

[ 0 ] May. 23, 2011 | SBO Editor

Last year’s health reform law revamping the U.S. health insurance system has small-business owners worried, according to a new survey.

Sixty percent of the 2,223 small-business owners and top executives who took the survey identified the cost impact from President Barack Obama’s reform initiative on their business as a top concern.

The finding, which is part of a broader survey on small-business attitudes released today by , comes as congressional Republicans continue efforts to roll back the new law and as some courts have ruled aspects of it unconstitutional.

Seventy-two percent of business owners or leaders at companies with up to 499 employees said they were “very concerned” about the cost of health care and employee benefits. That’s a slight increase over the 69 percent who said the same thing in 2010’s survey.

Worry about health care costs outweighs even concern about the economy among small-business owners—64 percent said they were very concerned about the state of the economy.

Asked where they would be spending money this year, small-business owners estimated they would be spending nearly 26.6 percent more on health insurance alone. To give that some perspective, the owners said they expected spending to rise on marketing and advertising by 25.4 percent and on travel costs by 9 percent. The only area they expected to spend more money on in 2011 compared with 2010, by percentage, was online marketing, which is estimated to increase by 62.2 percent.

The cost of health care traditionally has been a worry for small businesses, given that inflation in this area rose 131 percent from 1999 to 2009, a time during which general inflation was 29 percent.

Those who support Obama’s and the Democrats’ reform effort say that with more people required to own insurance—the law is expected to add 32 million Americans to the ranks of the insured—costs of insurance will stabilize because risk to insurers will be spread across a bigger pool.

But the worry for small businesses about health care cost increases has grown more acute with passage of the law. It doesn’t require businesses to buy health insurance for employees, but it does slap a fine of $2,000 a year per worker on any company with more than 50 employees that doesn’t provide health insurance.

And those businesses that have taken good care of their employees through so-called “Cadillac” health insurance plans—those worth $27,500—can expect to pay a 40 percent excise tax on those plans beginning in 2018.

Business lobbying groups like the National Federation of Independent Business have slammed the new law, and the NFIB has joined lawsuits challenging its constitutionality.

Because health care reform has become cast in stark partisan terms—when the bill became law, not a single Republican in either the House or the Senate voted for it—it’s important to note the political makeup of the small-business owners who took the survey. Of those who responded, 45 percent were Republican, 24 percent were independent, and 20 percent were Democrat.

The Business Journals, which conducted the survey, is a division of American City Business Journals, the parent company of Portfolio.com.

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Category: Features