If you own a small business in California, chances are you spend a good deal of time thinking about health insurance. Over the past seven years, health care has become an increasing luxury in The Golden State — and many small-business owners are being priced right out of the market. This is no secret, and yet the numbers are still shocking: According to a study released by The Commonwealth Fund in December 2010, health care costs across the state grew by 39 percent from 2003 to 2009. For small businesses, cost increases were notably greater – 83 percent during this same period.
John Arensmeyer, chief executive officer of the Small Business Majority, a Northern California small-business advocacy group, said that these rising costs have been detrimental for the entire industry.
"The rising cost of insurance has had a severe impact not only on small businesses' ability to afford health insurance, but to remain competitive and even, for some, to keep their doors open," Arensmeyer said in an email.
A recent survey conducted by his company found that 55 percent of California small-business owners do not provide health care coverage for their employees. Among them, 86 percent said that they simply couldn't afford it; of those who do offer insurance, 70 percent say they struggle to do so.
As ripple effects go, this one is fairly grand in scale. Many Californian business owners have had to choose between letting employees go and discontinuing health care coverage. Others have passed along the majority of health care costs to their workers. In the midst of a still-hurting economy, all of this means that business owners have less capital on hand to invest back into their companies and hire new employees. Ultimately, Arensmeyer said, these kinds of deficits have a negative effect on the small-business community, as well as on the larger state economy.
The next steps
Whether or not the Patient Protection and Affordable Care Act was the right approach, clearly some kind of reform is needed. California took great strides last year, developing its own health insurance exchange and, even more important in the short term, setting up provisions for small-business tax credits.
"More than 4 million small businesses nationwide will be eligible for a tax credit for the purchase of employee health insurance in 2010, including more than 450,000 in California alone," Arensmeyer said "That's nearly 80 percent of all small businesses in the state."
Leif Wellington Haase, senior fellow at the New American Foundation, a nonprofit public policy institute with a focus on health care, agrees that, over time at least, things are looking up for both small-business owners and for the insurance industry. This is in part due to overwhelming recognition of the need for change. For the past year and a half, Haase has led an affordable care task force composed of insurance company executives. To him the most striking part has been the willingness of these CEOs, as well as hospital administrators and consumer advocates, to take the needed steps toward health care reform
