Byline: Don Nelson
Apr. 23--Will Smithwick faced an uncomfortable decision late last year.
Smithwick, the owner of Uniforms 911 and Classic City Uniforms on Baxter Street, received notification that his health insurance premium on employees at the small business was increasing dramatically.
'Back in the fall, my premiums went up by $1,000 a month on three workers,' said Smithwick, whose enterprises employ three full-time people and seven part timers.
Consequently, Smithwick was forced to decide between giving his key people a raise or covering the monthly insurance hike.
'Instead of the pay raise, I went with the health insurance,' Smithwick said. 'The employees pay part of the premiums, but with this increase I wound up paying all of it, and they didn't get the pay raise.' Smithwick's dilemma has been echoed across the United States, where small-business owners cite rising premium costs and unaffordable health insurance as the biggest problem facing their commercial endeavors.
'Since 1986, this has been the No. 1 problem according to National Federation of Independent Business members,' said Jim Brown, a spokesman for the federation, which claims 600,000 members nationally and 13,000 in Georgia.
Additionally, Brown said, the disparity has grown between the level of concern about affordable health insurance and what members consider the No. 2 problem, which varies between legal reform and workers compensation.
'Far and away (affordable health insurance) is the No. 1 problem,' Brown said. 'That qualifies as a crisis.' Brown said premiums have been rising consistently for all companies, but generally small businesses have seen 11 percent to 12 percent increases during the past several years, while larger firms have experienced 7 percent to 8 percent hikes. The rate of increase has slowed some in the past year, Brown said, but still exceeds the rate of inflation by three or four times.
An annual employer health benefits study conducted last year and released in the fall by the Kaiser Family Foundation and the Health Research and Education Trust found that 60 percent of all businesses, regardless of size, offer some kind of health plan. For those firms that do not provide health coverage for their employees, 73 percent of all those businesses -- large and small -- cited high premiums as their reason.
BOS Temporaries in Athens does not offer the option of health benefits to its four full-time staff members because the costs are prohibitive, said Nat Carmack, vice president with the employment firm.
'Unfortunately, we don't offer health insurance,' Carmack said. 'We looked at it a while back, and (premiums were) just astronomical.' Carmack said just two months ago he was unable to hire an employee for a position he was trying to fill, and health benefits was the key.
'Health insurance benefits was a deal-breaker for her,' Carmack said. 'It's hard for small businesses to get the kind of group together we need to get affordable rates.' Brown said he recently talked to one employer in Georgia who shopped around for affordable insurance for his workers, and the lowest quote was 42 percent higher than what he had been paying. Brown said the business employed 22 workers, but in the past year one person had a baby and another suffered a serious illness.
Smithwick's staff experienced a similar scenario, with one worker suffering from a major illness and another getting pregnant. Smithwick said his insurance provider, Athens Area Health Plan Select, told him his employee pool had an excessive amount of claims.
The Kaiser study notes that telephone surveys were conducted with 2,995 randomly selected public and private nonfederal employers, including 2,013 who responded to the full survey and an additional 982 who responded to one question about whether or not they provide health coverage to their employees. The study further explains that it drew its sample from a Dun & Bradstreet list of the nation's employers with three or more workers.
Graphs in the study show that in 2005, 59 percent of firms with three to 199 employees provide health benefits to workers, compared to 98 percent of large firms with more than 200 people. Broken down further, 93 percent of companies with 50 to 199 workers offer benefits; 87 percent of companies with 25-49 workers include health insurance; 72 percent of those firms with 10 to 24 jobs make health benefits available; and 47 percent of companies with three to nine workers provide the insurance.
Most startup companies don't even consider health insurance when first opening, said John Maynard, director of program development for the Georgia Small Business Development Center office in Athens.
'The thing we run into all the time is most small businesses can't afford (health insurance),' Maynard said. 'Most of the startup companies we work with, that's not even discussed as a part of the initial package; they have to get the business up and running and growing and profitable first.' Even long-standing and profitable companies are finding it more and more difficult to afford the costs of health insurance.
The premiums at Cofer's Home & Garden Showcase have steadily risen by 10 to 25 percent every year, estimated owner Stuart Cofer, who said his company pays more than $16,000 a year for basic coverage with Athens Area Health Plan Select. Only key personnel or managers are covered, and the company pays 80 percent of the premium with the employees covering the other 20 percent.
Cofer said he has not shopped around for a different insurance carrier because he hasn't heard of another company in the Athens area that offered significant savings.
'In Athens, it is a unique market in the health care industry,' Cofer said. 'It's too far from Atlanta to get Atlanta prices.' Smithwick said he thought the Athens Area Health Plan Select system was approaching monopoly status.
He signed up with the group health coverage plan several years ago when the rates were the most attractive economically, Smithwick said. Now with rates climbing and restrictions on which physicians are qualified under the plan, his opinion has changed.
'When the hospitals are buying doctors' practices, and the hospital owns the insurance coverage, and they dictate what doctors you can go to, it's obvious they are going to shift business to themselves,' he said.
Smithwick has begun seeking other carriers and said that after his employee has her baby, he hopes to find help from an insurance group out of Atlanta.
Carmack said he has been considering health reimbursement accounts, a mechanism he learned about from a Sam's Club Web site.
'It seems to be promising for small businesses,' Carmack said. 'Rather than the company funding the entire amount of insurance, an employee can get his own coverage, and we can decide to put in a certain amount of money tax-free, which the employee can use it for paying the premium or medical expenses.' Some hope regarding affordable health policies for small businesses resides in the U.S. Senate, Brown said.
The Health Insurance Marketplace Modernization and Affordability Act of 2005 was introduced in March. The Senate might be voting on the bill shortly, Brown said.
'The bill is one NFIB members are focused on,' Brown said. 'The breadth of the coalition behind the bill is quite a diverse group, with 200 organizations behind it.' The premise of the bill, which outlines Small Business Health Plans, is to provide bargaining power to small businesses, Brown said.
'This bill will allow small businesses to pool together across state lines and give them the same buying power a union or Fortune 500 company has,' Brown said. 'Small businesses will be able to enjoy savings from greater bargaining power, economies of scale and administrative efficiencies.' Brown said the small business health plan option will not serve as a cure-all for the health care cost issue, but the bill is designed to level the playing arena of insurance products and premiums.
'It's a matter of fairness to small employers who are creating two of every three new jobs,' Brown said. 'The (Senate) bill will make a big difference.'
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