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Small Businesses Face Rising Health Care Costs

As Congress continues to discuss health reform proposals, many small business owners are facing a difficult choice between maintaining insurance programs for their employees or dropping them in response to sharp premium increases. In the Houston suburb of Spring, Texas, people are wary of government involvement in health care, but dismayed by ever higher costs for the insurance they have.

Milstead Automotive is a family-owned company that has operated tow trucks and automotive repair services here in Spring for 37 years. The company offers three separate health insurance plans for its 150 employees, partly as a way of keeping experienced, hard-working people on staff.

But Milstead Vice President Amy Milstead Ellzey says more than 40-percent price hikes by health insurance companies this year are making it hard for the company and its workers.

"It is terrible, we cannot afford a 44 percent increase in medical insurance, so that, in turn, makes us have to start looking elsewhere for different plans and it makes us have to cut the plan back some," Ellzey said.

She says the company wants to maintain health insurance, not only as an incentive, but as a way of maintaining each worker's health and productivity.

"That common flu or cold that turns into strep throat, you know, that could take a whole week or so to get over versus if he has insurance he can go to the doctor, get some medicine and be back to work," she said.

Ellzey says Milstead workers are like family and many are, in fact, related. Scott Schafer, who manages transmission service, and his wife Michelle, who works in accounting, say the health insurance is one of the things that keeps them here.

But they are concerned about their daughter, who was covered by their plan until she was 25 years old and then dropped.

"She is 26 and she does not have insurance," Michelle explained. "She is still going to school and she works part time, she cannot afford health care. So she puts off going to the doctor."

Scott and Michelle Schafer think something should be done to control health care price increases, but Scott says he is wary of any plan that would involve government control.

"I have not looked into all the reform bills for health care by the government, but to have the government control all the primary parts of the health care system I do not feel is a good idea," she said.

But he and his wife do favor some government role in holding down price increases by both health providers and the insurance companies.

Amy Ellzey agrees that something should be done to better control insurance companies.

"Our industry just went through a huge regulation and so they are controlling our rates and doing everything they can to watch what we are doing and to take control over how we charge our customers," she said. "Why aren't they doing that with insurance?"

But insurance companies say they are already regulated by each state and their price increases reflect cost increases in the health-care system.

But whatever the reason, high costs are driving many small companies away from providing health insurance as a benefit.

According to the Small Business Association, more than 60 percent of companies like Milstead offered their employees health insurance in 1993, but that had dropped to only 38 percent last year, leaving many workers on their own, looking for a policy they can afford.