Owners Wary of Healthcare Changes

It's déjà vu time, with the healthcare debate waking up after hibernating for years. This time around, it's not alive just in Washington, D.C., but Sacramento and Boston are getting into the game by trying to create state measures that address how to provide insurance for their citizens.

Along with the CEOs of larger companies, small-business owners are saying healthcare is their main cost, but reawakening the sleeping giant is making them nervous. There will be a long wait before they have a chance to see the size and shape of what emerges, if anything, but they are already raising concerns.

About 60 percent of owners of companies with fewer than five employees say that any sort of measure that forces them to provide employee health coverage, like the ideas tossed around in California and Massachusetts, would hurt their business, according to a Discover Card survey released yesterday. That's because right now 74 percent of those companies don't offer any kind of insurance for their employees.

"The cost of healthcare for a really-small-business owner is really backbreaking," says Sastry Rachakonda, director of Discover Business Card. Unlike larger companies, these tiny businesses don't have the luxury of spreading out costs among a high number of employees or the heft to negotiate deals with insurance companies.

At the same time, these companies want something to be done about the problem, saying that it's tough to find good help. While President Bush's plan to shift insurance costs onto individuals has many small-business supporters, critics worry that such measures would cause small businesses to drop coverage altogether. About a third of the companies in the Discover survey that said they do provide insurance are considering getting rid of it.

But not so fast, says Rachakonda. Offering health insurance gives these companies an edge in hiring the best people. Because their companies are so small, these owners are emotionally tied to their businesses and employees. "There is very often a personal dynamic there," he says, meaning that small-business owners may not be so quick to leave employees out in the cold. With healthcare costs rising, even without Washington action, they may not have much of a choice.