Worker health costs replace taxes as top pain

By Jim Hopkins
USA Today

SAN FRANCISCO — For the first time in almost 20 years, small businesses say soaring worker health costs, not taxes, are their biggest headache.

Taxes had been No. 1 since 1986.

The healthcare cost hikes threaten to further raise the number of workers without company-sponsored health insurance or who pay more of it themselves.

The impact could be wide: The nation's 5.8 million small companies employ about half of all workers. If they're spending more on health, they're spending less on other goods.

Healthcare costs are rising about 15 percent this year for those with fewer than 200 workers vs. 13.5 percent for those with 500 or more, says Mercer Human Resource Consulting. But many small employers cite increases of 20 percent or more. That's made insurance the No. 1 small business problem, say four months of surveys by the National Federation of Independent Business trade group.

The higher costs come as small companies struggle to grow in the soft economy. The NFIB says just 1 percent of firms surveyed last month plan to add workers — the lowest such figure since December 1991. Historically, small companies create most new jobs, making them crucial to economic recovery. But as their health premiums climb, more are:

• Eliminating benefits. About 61 percent of companies with fewer than 200 workers offered health coverage last year, down from 67 percent in 2000, says the Kaiser Family Foundation. About 99 percent of bigger companies offer it.

• Shifting costs to employees. In Atlanta, eCommSecurity's premiums soared 39 percent this year on top of similar increases in each of the past two years.

The computer network security firm might ask its 63 employees to pay all of their dental, vision and life insurance premiums, CEO Jeff Moore says.

In the future, the company might offer coverage only for catastrophic illnesses such as cancer, and ask workers to pay for routine doctor visits.

Annual deductibles paid by the 48 workers at Packaging Logic in La Porte, Ind., jumped in January to $1,000 from $500. That helped reduce the corrugated box maker's premium increase to 9 percent from an initial 18 percent. Also, doctor visit co-pays rose to $20 from $15.

Near Birmingham, Ala., Concept's 11 employees are paying more for hospital visits to keep the design firm's insurance increase to 7 percent this year rather than a proposed 10 percent.

• Cutting overhead. Employment agency Abator in Pittsburgh has delayed upgrading computers, even though CEO Joanne Peterson knows that will slow productivity growth. Abator was socked with a 36 percent premium increase this year on top of 17 percent in 2002.