Health Care Reform will Cut Costs for Small Businesses

Health Care Reform will Cut Costs for Small Businesses


It is a pleasure to stand to talk about health care following upon the remarks of Senator Jeanne Shaheen, Senator Mark Warner, both whom as governors had the opportunity to know firsthand how important health care reform is to taking our nation forward.  They come from very diverse states, but the observation is the same: that health care reform is essential to putting our nation back on track, and now is the time.

I’d like to direct my comments today specifically to the benefits of health care reform to small businesses.   We all know that the current system just doesn’t work for small business employers or their employees.  Without numbers behind them, they have no ability to negotiate rates with insurance companies.  They are like lambs to the slaughter.  More often than not they just have to take whatever deal is offered, and those deals are not very good.  On average, small businesses pay 18% more than large firms for the same health insurance policies.  Because of this, they are far less likely to provide health insurance.  Just 49% of firms with 3 to 9 workers and only 78% of firms with 10 to 24 workers offer health insurance to their employees as compared to 99% of firms with 200 or more employees in the same year.

When small firms do offer health care, rising premiums force owners to make hard choices between keeping health coverage, expanding their operations or increasing wages.  In the last decade, health care premiums for the average Oregon family more than doubled while median earnings rose only 23.8%.  It’s no coincidence employers are spending more on compensation, but that compensation is going to higher insurance premiums rather than higher wages.

Last month I talked to small business owners in Medford and in Portland, cities in my state, who share strikingly similar stories about the problems rising health care costs are causing for them.  David Wilkerson runs a Medford architectural firm that employs 12 full-time employees.  He is dedicated to providing a family-friendly work environment and he provides full medical, dental and vision coverage to his employees.  The company has had to deal with large annual increases in health care premiums and has had to change carriers several times in order to try to keep those costs down.  Health care costs are the second-highest expense for David’s firm.  The second-highest expense, only payroll exceeds it.  This year rising health costs forced David and his partners to look very closely at either eliminating health care benefits or laying off employees.

Jim Houser and his wife Liz Dolly tell a similar story.  They operate the Hawthorne auto clinic in Portland.  When they opened their door 26 years ago, they made a commitment to offer those who work with them a good benefits package, including comprehensive health care.  Jim and Liz are still able to provide health insurance to their employees, but premiums have gone from 9% of their payroll to 18% in five years.  As a result, they had to cut back on benefits.  These and otherwise successful small businesses have been hamstrung by health care costs.  Will reform help these small businesses?

Yes, it will.  It will help them a lot.  First, it will allow them to enter into health care exchanges where they’re part of a much larger pool.  With their increased market clout they’ll be able to negotiate lower premium costs and these rates will be much more stable than in past years.  One sick employee will no longer make an entire group uninsurable.

Second, the exchanges will offer more and better policies from which to choose.  Currently, many small businesses struggle to find any insurance that will offer policies.  But through health care reform and as part of the exchange, they’ll be able to choose from a number of different plans, and because these plans will have to meet certain standards, small businesses will have higher quality policies to choose from.

Finally, better choices at a lower price will mean small businesses can dedicate more revenue to increasing wages, more money in the pockets of their employees, and more opportunity to invest in new equipment or hire additional employees.  This is good for these owners, and it’s good for our economy, and it’s good for the employees.  

Health care costs have become a millstone around the neck of our small businesses, dragging down our economy.  Health care reform will help small businesses thrive by lowering costs, improving service and enabling small business owners to focus on making their business more successful.