25 May 2004

Health costs hurting more small businesses

The cost of health insurance -- ranked the top concern of small businesses since 1986 -- still holds that dubious distinction, a new nationwide survey shows. But the percentage of firms affected by those costs has grown substantially.

The study, by the National Federation of Independent Business and Wells Fargo, found that two-thirds -- or 66 percent -- cited health care expenses as a critical problem. That's up from 47 percent in 2000. This year, 4,603 small businesses responded to the survey, which has been conducted every four or five years since 1982.

``Health care costs is No. 1 for everyone,'' regardless of what type of business they own or where they are located, said Bruce Phillips, the business federation's senior research fellow.

``Small-business owners have been receiving increases of 15 to 20 percent a year in their premiums for approximately the last five years,'' he added, noting that the added costs are being driven by the aging population and increasingly sophisticated medical treatments.

Phillips said the growing expense is forcing more and more small businesses to pass a greater share of health insurance costs onto their employees or to cancel such coverage altogether. That assessment is supported by other research.

The average annual health premium per worker in 2003 cost $3,383, up $912 or 37 percent from 2000, according to a study last year by the Kaiser Family Foundation and Health Research and Educational Trust. Over the same period, the percentage of firms offering health benefits dropped from 69 percent to 66 percent.

More than 43 million people in this country are uninsured, according to a U.S. Census Bureau report last year. And most of them -- 25 million -- either own businesses with fewer than 100 workers or are employees or dependents of such firms.

Jackie Marr, who owns Kiss My Glass, a stained glass and bead shop in Santa Cruz, is among those who can't afford to provide health insurance for her workers. But that's not her biggest worry right now.

``At this moment, my huge concern is that there is massive roadwork going on in front of my store,'' she said, which has turned Seventh Avenue into a kind of obstacle course and caused many of her customers to stay away from the area. ``It's killing me.''

For Marie España, who runs España's Collision Repair in San Jose with her husband, her list of problems are topped by the costs associated with workers' compensation.

``I mean every year they go up a certain percentage,'' she said. ``It's outrageous.''

Indeed, workers' compensation costs ranked third in this year's small business survey, just behind the cost and availability of liability insurance.

By Steve Johnson
Mercury News

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