Health Care Shackles

[Haruko]

I saw the following article at Reuters today, and it brought me to mind of everything I have been reading or hearing about health care, including in political activist Michael Moore's Sicko. I have no meaningful commentary to provide, but I was hoping to read the comments this article may spur, as I know this is an issue that affects — and significantly interests — a large number of people here.

Health-care costs handcuff entrepreneurs

By Andy Sullivan

WASHINGTON (Reuters) - Countless workers in the United States are trapped in jobs they would like to leave because they cannot get health insurance elsewhere, calcifying innovation and mobility in the world's largest economy.

Daunted by health-care costs, a would-be technology entrepreneur in Texas decides not to start her own business. A communications expert in Washington decides not to strike out on his own. And a freelance magazine editor in Brooklyn decides to take a less satisfying corporate job.

"I would rather be freelancing, no question," said Jessica Tolliver, a former editor who now works in public relations. "I got my work done in less time, because once I finished what I had to do, the time was my own."

Economists call this phenomenon "job lock," and studies suggest that it keeps between 20 percent and 50 percent of workers from leaving their current jobs.

Because health insurance is tied to employment in the United States, workers who leave their jobs can see health bills skyrocket if they strike out on their own or take a position with a company that offers fewer benefits. Workers who would like to retire early stay on, unable to qualify for the government's Medicare program until they turn 65.

And those who have existing health problems may not be able to get coverage at all.

Job lock is difficult to measure because many employees don't like to advertise their unhappiness. But economists and small-business advocates say it takes an enormous toll on productivity.

SLOWING INNOVATION

"We can definitely say that it's slowing down the rate of innovation," said Tim Kane, an economist with the Kauffman Foundation which promoted entrepreneurship.

For Mike, a Washington-based communications professional who did not want to use his last name, health costs may force him to pass up the chance to be his own boss at a time when he could easily pick up several major clients.

With two children at home, Mike said he was reluctant to abandon the generous benefits he gets at the trade group where he currently works. Self-employment would probably mean spending more for fewer benefits.

"I don't want a bad event to knock me and my family out of the box," he said. "It's a real hurdle."

As head of the National Federation of Independent Businesses, Todd Stottlemeyer frequently encountered would-be entrepreneurs who let their ideas go stale and their products languish on the workbench because they did not want to shoulder their own health care costs.

When he asked audiences if health insurance has affected their employment decisions, often half the hands in the room would go up.

"There are lots of factors that go into why somebody starts a business or doesn't start a business: Do I have a good idea, do I have capital, do I have risk tolerance?," said Stottlemeyer, now an executive at a hospital chain. "Being able to get health insurance ... should not be one of those determinant factors."

Making insurance more affordable for the self-employed could lead to a wave of new businesses, one study suggests.

New Jersey saw a 14 to 20 percent rise in entrepreneurial activity due to a 1993 law making it easier for the self-employed to afford health insurance, a study by Philip DeCicca of McMaster University in Hamilton, Ontario found.

Roughly 60 percent of the U.S. population now gets its health coverage through work, but the system is increasingly strained due to rising costs.

Congress is working to overhaul the troubled system. The Democratic majority hopes to pass a law which President Barack Obama can sign by the end of the year. However, employer-based care is likely to remain a bedrock of any new approach.

The link between healthcare and jobs evolved during World War II, when the government imposed wage controls but allowed companies to adopt health-insurance plans to lure employees.

Small-business groups have often complained this unfairly tilts the playing field toward large employers that have the clout to negotiate rates that are 18 percent lower on average, according to the Commonwealth Fund.

Consequently, workers at small firms are much less likely to have health insurance. While 99 percent of companies that employ more than 200 employees offer health coverage, only 49 percent of companies that employ between 3 and 9 workers do so, according to the Henry J. Kaiser Family Foundation.

Part-time workers are also less likely to get benefits than full-time employees, according to Kaiser.

Self-employed workers face a further disadvantage because they cannot deduct health-insurance payments from their income taxes, unlike companies that maintain a payroll.

As a freelancer, Tolliver could work from wherever she and take playground breaks with her daughters. But a $1,200 monthly healthcare bill ultimately led her to take a job where insurance only costs her $200 per month.

"It would be obnoxious to say were struggling to put food on the table. But that said, it was a lot of money."

(Editing by Alan Elsner)

This article also provoked in me this question: I wonder how America would look today if all those people have not been stifled by the thought of losing the health insurance provided by their jobs.

[FireNexus]

I can't see why this would come as a surprise to anyone. A social safety net allows people to take risks that they might not otherwise take, like starting a small business. For all the conservatives like to talk about the good, industrious, hard-working Americans, their policies consistently destroy the ability of that group to get anywhere.

[Broomstick]

I suggest that this be moved to the healthcare vents thread, as it would seem appropriate for that extended topic.

And I actually have more to contribute to the topic, but I'm pressed for time at the moment.

[Patrick Degan]

I can't see why this would come as a surprise to anyone. A social safety net allows people to take risks that they might not otherwise take, like starting a small business. For all the conservatives like to talk about the good, industrious, hard-working Americans, their policies consistently destroy the ability of that group to get anywhere.

That's because that's actually one object of the exercise: to limit options and opportunities for the common people and thus tie them to employment with larger corporations where they have no choice but to slave away for whatever wages and benefits the company can provide at minimum within the law and to make the prospect of unemployment and poverty a scary one. Has a nice way of neutralising trends toward union organisation and political activism which could threaten the corporatists.

[Mayabird]

The Wall Street Journal had a similar article today as well.

More Small Firms Drop Health Care
By DANA MATTIOLI

Accelerating health-care premiums and sharp revenue shortfalls due to the recession are forcing some small companies to choose between dropping health insurance or laying off workers -- or staying in business at all.

Sheryl Weldon, owner of Commerce Welding & Manufacturing Co., saw health-insurance payments increase to more than $800 monthly per employee from about $200 five years ago. With monthly revenue down 10% since December, Ms. Weldon stopped providing health coverage to employees, including one being treated for prostate cancer, for the first time in the 64-year-history of the Dallas sheet-metal company.

Ms. Weldon and several of her 14 employees are going uninsured and the third-generation business owner is struggling with the emotional toll of the decision.

"I have a terrible time handling that I can't give them that coverage," says Ms. Weldon, 52 years old. "How do you expect someone to be at their job everyday and perform if they can't be healthy?"

As the Obama administration wrestles with broader questions of health-care overhaul, tough economic times are forcing more businesses to grapple with stressful questions about discontinuing coverage. Health-insurance premiums for single workers rose 74% for small businesses from 2001 to 2008, the latest year data are available, according to nonprofit research group Kaiser Family Foundation.

About 10% of small businesses are considering eliminating coverage over the next year, up from 3% in 2005, according to a recent survey by National Small Business Association.

Commerce Welding and Manufacturing Co., one of many small companies faced with high health insurance premiums and reduced revenue, is joining the crowd cutting coverage.

That follows earlier declines in coverage, with just 38% of small businesses providing health insurance last year compared to 61% in 1993, according to the trade group. In 2007, 41% offered coverage. A Hewitt Associates survey found that 19% of all companies plan to stop providing health-care benefits in the next three to five years.

Assurant Health, a national health-insurance provider, has recently seen more small businesses canceling coverage. Scott Krienke, senior vice president of product lines, says premiums typically increase 8% to 16% yearly for small businesses, with the smallest firms particularly at risk for large rate increases.

In March, after losing a large client that accounted for more than 50% of revenue, Kelly Reeves canceled health insurance for her three employees. Ms. Reeves, president of seven-year-old public-relations firm KLR Communications, says she had to choose between that and laying off an employee.

Ms. Reeves says turnover is a concern even in this slack job market, but she has told her employees she understands if they leave for a job with medical benefits. Should business pick up, she plans to reinstate health insurance but provide less expensive coverage.

"You want to attract good talent and benefits are important for that," says Ms. Reeves.

Even small businesses that continue to provide benefits say the question of dropping medical insurance is one of the most difficult they face.

Shanahan Sound & Electronics Inc., a Lowell, Mass.-based sound- and video-design firm, has seen a 50% decrease in monthly revenue since last year. Health-insurance costs increased by 14% this year to approximately $7,000 per month. Catherine Shanahan, president of the 16-employee firm, refuses to cancel the plan. "I really believe it would be the worst thing in the world I can do for morale," she says.

Karen McLeese, vice president of employee benefit regulatory affairs at business services firm CBIZ, has been steering companies that consider dropping insurance to less costly high-deductible plans and cost sharing.

"In today's environment, health insurance is extremely costly and to shift that burden to individual employees when raises and bonuses are trimmed really makes it a double whammy," says Dennis J. Ceru, professor of entrepreneurship at the Babson College Graduate School of Business near Boston.

Many of the employees losing insurance are priced out of private plans. Mr. Ceru says the cost for a family on an private plan can exceed $20,000 a year.

Dennis Morgan, a driver at Commerce who's being treated for prostate cancer, worries about how he will pay for surgery should he need it. The 60-year-old's $500-a-week salary makes him eligible for a program at his hospital where he can receive prescriptions at a low cost and pay between $5 and $10 for doctors' visits. But he would be required to pay a percentage of the cost of any medical procedure.

Mr. Morgan has looked into private health insurance but says he can't afford it. At the same time, he understands Ms. Weldon's decision to eliminate coverage.

"We needed to cut health care," says Mr. Morgan. "It's the only thing left to cut."

Still, the decision rarely sits easy with those making it. "If I think about it, I can't sleep," says Ms. Weldon, who says that her father and grandfather had always covered 100% of health-insurance expenses.

Dana Korey, president of San Diego organizing company Away With Clutter, eliminated health insurance for her 15 employees in January.

"It was incredibly painful, these people are like family to me and I felt like I let them down," says Ms. Korey.

Amid the recession, many of her clients could no longer justify organizing jobs, which typically range between $3,000 and $7,000. Now Ms. Korey is changing her business strategy and creating a DVD on organizing. She is using the savings from canceling health insurance, roughly $5,500 monthly, to fund the venture.

Write to Dana Mattioli at dana.mattioli@wsj.com

[Themightytom]

Why do I know this trickle down clusterfuck is going to be blamed on the Obama administration.

[Patrick Degan]

Why do I know this trickle down clusterfuck is going to be blamed on the Obama administration.

That depends upon how quickly he can move to get some sort of comprehensive health care reform in place and running. If he can point to at least some change in the level of safety-net coverage, he gets credit for fixing a problem he inherited, rather than getting caught with the blame for it post-hoc.

[UCBooties]

This hits pretty close to me, as I'm sure it does for many of you. Right now I get my only benefits through temping at a job that has no full-time prospects and because of scheduling actually hinders my ability to search for a better job. Despite this, I'm putting a lot of time and effort into getting my acting career off the ground. If, I pull it off, I'm essentialy going to be a self employed contractor. How to pay for health coverage on a fairly low and probably inconsistant income is a large concern at this point.

[FireNexus]

If you're going to be a film/television actor, you can get benefits through SAG.

[UCBooties]

It's more likely that I will be joining AFTRA since I mostly do voice work.

[Themightytom]

Health insuracne is definitely an improtant issue, i noticed the other day that it is in the DSM Axis 4 criteria right up there with "housing situation" and "Occurence of criminal activity" (The second one I forget the exact wording, but the gist is, its as important a factor in determining mental health as being homeless or having a warrant out.