News

The Recession Will End… When Small Businesses Can Afford Health Care

Says who: 27 million small business owners

“It’s gotten to the point where it’s such a huge expense that I don’t know if we can continue doing 60 percent,” said Dan Verbeten, owner of Gardan Inc., a contract manufacturing company in Hortonville. “It’s the fourth-largest expense item.” (via BizJournals.com)

Why it might be false: Providing health benefits has been a growing expense, even before the recession took hold. According to a study by PricewaterhouseCoopers, health care costs for employers rose 10 percent in 2008 alone. Such costs are behind a disheartening trend: Just 59 percent of small business employers provided health benefits in 2007, down from 68 percent in 2000. But whatever health care’s crimes, it’s on its own track, separate from the forces that brought down the economy.

Why it might be true: On the other hand, some small businesses have reported holding back on key purchases, or delaying new hiring plans, because of the weighing cost of health benefits for existing employees. Why single out small businesses? They pay an 18 percent premium over larger employers (who can buy in bulk). With small businesses accounting for more than half of the GDP and about half of all employment (at normal levels), easing their health benefits pressures will surely spur increased productivity and hiring.

Our call: Health benefits have never been a measure of the economy’s health like, say, the GDP. Consider, also, that these are called “benefits” for a reason. But with an aging and expanding population, and a rising cost of health care, some help with insurance premiums will no doubt make a difference on disposable income for individuals. If small businesses can wrestle this expense into a manageable state, they will be able to grow — a sure sign of a robust economic period.

Tags: economy, Small Business, The Recession Will End...