It's the Economy, Stupid

During the 1992 presidential campaign, James Carville’s famous three message principles were “It’s the economy, stupid,” “Change vs. more of the same,” and “Don’t forget about health care.”  17 years later, all three of them describe the health care crisis of today.  Simply put, not only is our health care system a disgrace and an outrage, but it’s now a terrible deal for small businesses – the main driving force of job creation in the U.S. at a time when we urgently need to create new jobs.

In 1993 and 1994, small businesses were very active against the health care reform, largely because it contained a mandate requiring employers to provide coverage.  As reported this week in The Newshour With Jim Lehrer (sorry, PBS seems dead set against using an embeddable video player.  Sigh), small businesses are now also feeling the pinch, particularly as business slows.  They’re faced with a number of choices – all of them bad.

•    Pay out rising premiums each year, knowing that in the economic downturn and credit crunch, that money’s going to become even tighter.
•    Change coverage to a high-deductible plan, knowing that their employees must pay expenses out of pocket until their coverage kicks in.
•    Changing to a plan that covers less (for example, a minimal prescription drug plan), just to cut out on costs.
•    Struggle to convince their employees that the coverage they have is worth them paying even more of the costs themselves – because the company can’t afford to.

As the story on Jim Lehrer demonstrates all too well, any of the above are likely to drive the younger, healthier employees to opt out entirely.  After all, those who are younger and healthier have at least a chance at finding affordable individual plans, or risk going without insurance to save money.  The ones left in the company plan aren’t so lucky – they tend to be older and more likely to get sick, driving up premiums.  Ironically, the maneuvers intended to cut costs escalate them instead.  And the cycle continues.

As troubling as these decisions are on a personal level (and it must be even worse in companies where the boss must look his or her employees in the eye every day), a general sense of competitive unfairness is taking hold for small businesses.  In a survey of New York State by BALCONY and the Small Business Majority, 61% of small business owners say it’s flat-out unfair that employers who offer insurance have to compete with those who don’t.  It’s the quintessential unequal playing field, one that penalizes owners who try to do right by their employees.

These problems aren’t new, but they get worse as health care costs continue to soar.  Of the 45-47 million uninsured in this country, nearly half of them work for small business that either never offered benefits or stopped offering them because of cost.  In fact, most of the growth in those without insurance are exactly in this demographic – workers who make decent wages but don’t receive benefits and can’t afford insurance on their own.

The next time someone tells you we can’t fix health care because we need to focus on growing the economy – ask them what they think is strangling small businesses throughout the country more than health care costs.

A question for those of you who own small business, or those who work for one – how is your company making the tough choices in this punishing economy?

(Photo credit: Angela Radulescu on Flickr.)