Senator Mary L. Landrieu
After years of struggling with costs that were eating into his bottom line, David White, a small business owner in Maine, recently dropped health insurance for himself and his employees. It was a nerve-wracking decision. "I just hope my people or I don't get sick," he told a small business advocacy group.
Louise Hardaway wasn't willing to take the same risk. Health-care costs forced her to close her small business in Tennessee. Factor 4 Life was, ironically, a business that helped people navigate the health-insurance system!
Unfortunately, these stories are not unique. As chairwoman of the Senate Committee on Small Business and Entrepreneurship, I hear about a lot of business owners hit hard by health-care costs. These costs not only eat into profits, they prevent small businesses from hiring more workers.
Small firms, defined as less than 500 employees, pump almost a trillion dollars into the economy each year, create two-thirds of our nation's new jobs annually, and account for more than half of America's work force. But too much of their money is going toward high health premiums that are increasing faster than the prices of the products and services they provide—four times faster than the rate of inflation since 2001, according to the Kaiser Family Foundation.
Nationwide, small firms will spend $156 billion on health premiums this year. In place of those high premiums, small business owners could employ 10 million additional workers—the entire state of Michigan—at minimum wage for a year.
Unless something is done, annual health-care costs for small firms over the next 10 years are expected to more than double to reach $339 billion in 2018. As those costs increase, the burden will get heavier and force many of them to lay off workers. The Small Business Majority, an advocacy group, estimates that over the next decade about 943,000 small business jobs will be lost.
Today, there are already 14.9 million people unemployed in America. We don't need to add to those ranks, instead we need to help small businesses create more jobs. The path we are on now is unacceptable and unsustainable.
Small businesses want to provide health coverage to their workers, but when faced with cutting employees or cutting insurance, the insurance is the first to go. In 1993, 61% of all small companies offered health coverage. Today that number is less than 38%.
Employers who can afford to provide health coverage are providing it because they are competing with big businesses that offer quality health-care choices for top talent. Businesses not offering coverage are often small, low-wage firms that can't afford it. There are 27 million small businesses in America, 22 million of which are sole proprietorships. And it is often sole proprietors that have trouble affording health insurance.
Insurance premiums for sole-proprietors are up 74% since 2001. This has made health insurance even harder to afford. And while big firms can deduct health premiums on their federal tax returns, under current tax rules sole proprietors often cannot. This forces them, on average, to pay nearly $2,000 more a year in taxes than they otherwise would have to pay. That is money they could use to buy new computer equipment or other things necessary to keep a business running efficiently.
The additional tax burden that sole proprietors have to pay has not yet been addressed by proposed health-care reforms. To keep our economy healthy we must keep our small businesses healthy, and that begins with stable, affordable health insurance.
I am committed to working with my Senate colleagues and the Obama administration to ensure that the health-care reforms our small businesses desperately need are passed. Small businesses—and all Americans—can't go another pay check without meaningful reform.