BW Online | August 11, 2000 | A Migraine from Health-Care Costs

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AUGUST 11, 2000

MANAGEMENT

A Migraine from Health-Care Costs
It's getting difficult for small businesses to offer insurance

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Are rising health-insurance premiums making you sick? You're not the only one. Skyrocketing health-care costs rank as the single most vexing problem for entrepreneurs, according to a new study by the National Federation of Independent Business.

The condition appears to be chronic. This is the fifth time since 1982 that the NFIB has conducted its comprehensive Small Business Problems & Priorities study -- and the fourth time in a row that cost of health insurance has captured the No. 1 spot, with 47% of respondents characterizing the problem as "critical."

With responses from 4,044 small-business owners nationwide, the report provides a look at the myriad things that drive entrepreneurs batty. Other headaches that made it into the top 10: federal, state and Social Security taxes; "unreasonable" government regulations; workers' compensation costs; and cash flow. Most of those have been at or near the top of the list for years. Rising up the charts "with a bullet" is "locating qualified employees," which shot from No. 11 in 1996, the last time the survey was taken, to No. 3 this year. In a similar vein, the cost of outside help (such as accountants and lawyers) rose from 52 in 1996 to 21 this year.

BAD COMBO. Combine human-resource problems with health-insurance issues, and you've got the makings of a major headache. Small companies have long found it difficult to compete with large ones for talent, and the increasing inability to provide competitive health benefits makes it even harder. Currently, only 35% of small companies offer full-family benefits to employees, and 38% offer no coverage at all, according to a recent survey by American Viewpoint Inc.

Both numbers are likely to increase as premiums continue to rise. Health insurance "is a very attractive benefit," says William J. Dennis, a foundation research fellow and author of the NFIB study. "The inability of small businesses to offer it as frequently as large firms is definitely a strike against them."

The NFIB will conduct its next survey in 2004. Any bets on what issue will capture the No. 1 spot? "Health care," Dennis says without missing a beat. "Call me a cynic, but after all these years, not much has been addressed. The only way it will come down is if small firms just abandon wholesale their provision of health care. And I don't see that happening."