Rising Health Care Costs Imperil Small Businesses

During 2011, many small business owners in America dropped health benefits for their employees. Going into 2012, the next tier of disappearing job-related coverage may be waiting in the wings, as some pundits say premiums could increase by as much as 18 percent.

Small Business Owners Carrying the Full Insurance Load

Many business owners split the cost of health coverage with their employees, but small companies tend to foster an intimate work culture. Cognizant of the state of the economy, employers who have shouldered the entire burden of insurance costs may have to choose between keeping their business afloat or their workers insured.

Due to the recession, which began in 2009, and a job market that has hovered near 10 percent for almost two years, caring employers feared that if their workers had to pay the full cost of their insurance, they would opt out, thus depriving themselves and their families of health benefits.

However, if the rate hikes follow predictions, and assuming the average cost of group health plans, a small business of roughly 20 employees could mean a health insurance bill of $18,000 for the business owner. At those levels, medical insurance costs could easily sink a business already struggling to stay profitable in the recovering economy.

Legal Status of Federal Health Care Reform Under Debate

In March, the U.S. Supreme Court is set to review the constitutionality of the provision of the Affordable Care and Patient Protection Act that would require all Americans to have health insurance by 2014. Also, by 2014, all states must have formed insurance exchanges where consumers can shop for affordable coverage at competitive rates.

If those aspects of health care reform are implemented on schedule, approximately 20 percent of small business owners currently surveyed say they would discontinue health care benefits for their employees entirely. Under the new law, however, businesses with more than 50 employees who work, on average, 30 hours a week, would also be required by 2014 to provide health coverage or be fined $3,000 per worker.

Small Business Owners in a Holding Pattern

Small business owners are in a “holding pattern” on health insurance not just because of the impending Supreme Court review, but also because 2012 is a presidential election year. The conservative opposition to the Obama administration has made “Obamacare” a central point of debate and all the viable conservative candidates are promising some degree of “dismantling” of the current health care reform package if elected.

For his part, President Obama is having difficulty defending his health care program when cash-strapped Americans have actually seen an 8-9 percent increase in their premium rates over the last year. Thanks to job losses in 2011, approximately 52 million Americans have no health insurance and there is a general air of confusion and discontent with federal efforts to remedy that situation.

Going into the 2012 presidential election, voters are much more likely to cast an emotional ballot weighted toward the candidate and platform with the strongest economic appeal. To date, most Americans believe health care reform has cost them money, rather than delivering the promised savings, a situation that is particularly harsh for small, struggling businesses.