Small Businesses' Perceptions of Health Care Issues and Costs
Chawla, Sudhir K., Smith, Mary F., Kibe, Jaideep, Bruha, Harlan L., Journal of Business and Entrepreneurship
The 1990s will continue to mark health care costs as a major issue facing small businesses. Since health insurance may become mandatory for all employees working 17.5 hours per week, this research assesses small businesses' perceptions of health care costs, mandated health care systems, and cost containment strategies. The major findings of 179 completed surveys of small businesses in Louisiana and West Texas indicate: (1) rising health premium rates are very problematic for small businesses; (2) small businesses are generally unaware of Health Maintenance Organizations; (3) respondents with higher education levels think that the government should take a role in providing basic health care to all citizens and businesses; and (4) some small businesses favor tax exemptions for health care coverage and creation of a government pool for uninsurable businesses.
Small businesses are under attack for not guaranteeing health insurance to all of their employees. Senator Edward M. Kennedy, D-Mass., introduced the "Basic Health Benefits for All Workers Act," S.768 in the 101st Congress, which would make health insurance mandatory for all employees working 17.5 hours/week and their families, and would also require new federal and state programs to cover the unemployed by 1999 (Bolnick, 1990).
According to a survey by the Property and Casualty Risk and Benefits Management section of the National Underwriter, 92% of small businesses had a major problem with health care insurance; also, 60% of the respondents agreed with the statement "Americans should receive the minimum level of health care regardless of their ability to pay and every American has a right to basic health care." This clearly demonstrates that small businesses are very interested in health care, although mandated health care may not be the option that most of them would elect (Brostogg, 1989). Opposition to mandated health care may stem from a fear of government intervention, the fear of rising health care insurance costs, or the fear that all employees might be eligible to receive health care insurance (Brostogg, 1989). These findings bring to the forefront the fact that health care reform is much needed.
Recently there has been growth in formal health care cost containment organizations like Health Maintenance Organizations (HMOs) and Preferred Provider Organizations (PPOs). HMOs provide all health services to their members for a flat fee. PPOs consist of affiliated medical practitioners who provide services at a discount to their members. In order for HMOs or PPOs to be successful, they have to control costs as well as be attractive to the public. HMO's restricted membership access makes them cheaper than PPOs or other managed care programs due to their lower premium costs and a lower rate of hospitalization.
However as Havey (1989, p. 9) points out, "Shifting of medical plan costs to employees has contributed significantly to the way employees choose between indemnity plans and preferred provider organizations options." In fact, the concept of "choosing" has led to PPOs gaining a lot of ground. Predictions have been made that PPOs would have 40% of the market share by 1990 (McCombs, 1988). By the year 2000, perhaps 70% of insurance premiums will be paid to some sort of self-capitalized managed care plan rather than to traditional insurance (Maxey, 1988).
According to a recent study undertaken by the American Hospital Association (AHA), "75% of the 34.8 million uninsured are self-employed or are dependent on those employed." Also, small employers are more likely than large employers to change insurers from one year to the next, and small groups are perceived by insurers to be a very unstable lot (Maxey, 1988, p. 3). The HIAA came up with some suggestions to solve the health care crisis. They were: (1) expansion of Medicaid coverage to all under the federal poverty line; 2) statutory laws, including a raise of pre-emphasis of state mandated benefits; and 3) no taxes on employee benefits and full tax deductibility for coverage of the self-employed (Maggenty, 1988). …