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Health Care Blues: Small Businesses Cutting Medical Plans, Survey Finds: Owners See More Profits, Hiring Ahead

Posted on: Wednesday, 8 March 2006, 12:00 CST

By Thuy-Doan Le, The Sacramento Bee, Calif.

Mar. 8--Jesus Fernandez Jr. was proud to give his employees health care benefits in the first few years of his business. But as costs rose he struggled. He dropped the coverage.

"It's become another benefit we could not afford," said Fernandez, the owner of Fernandez Barragan & Associates in West Sacramento, a financial consulting firm. "We would have had to pass the costs on to our customers and lose business."

That's a refrain being heard more often inside the offices of California's small businesses. According to a new survey by Union Bank of California, 52 percent of the 1,951 small-business owners who participated said they did not offer health care benefits.

Nationally, about 53 percent of small businesses do not offer employee health benefits, according to the Small Business Administration's Office of Advocacy.

Union Bank's results mark the first time in the survey's six-year history that a majority of California's small-business employers failed to provide health care benefits, said Barbara Hoose, executive vice president of the bank. And for those that did offer coverage, 25 percent said rising costs have forced them to shift more of the burden to their employees and reduce overall health benefits.

The annual survey is designed to assess the concerns of small businesses and their plans for the future, including whether they are hiring, growing, optimistic or are considering capital expenditures, Hoose said.

The businesses surveyed employed from one to 250 workers. About 55 of the respondents were in Sacramento, Yolo, El Dorado or Placer counties.

Overall, the survey showed that small businesses seemed to have an optimistic view of 2006, Hoose said. Nearly 70 percent of employers said they expect their profits to be higher this year. About 36 percent of respondents said they were planning to hire more employees. Only 2 percent said they will have layoffs.

The survey listed what employers believe are their top three issues in 2006:

* Workers' compensation insurance costs (51 percent).

* The state's economy (34 percent).

* State and local regulation (31 percent).

The respondents also said that doing business in California had its advantages. About 30 percent said the state offered opportunities for growth; 20 percent cited family ties for doing business here; and 17 percent liked the climate.

"The most positive thing is that they're set on increasing their staff," Hoose said. "They think their sales or service is growing and they're going to need more support."

Glenn Fong owns Fong Real Estate, which has offices in Roseville and Fair Oaks. He wants to add staff and said job candidates often are surprised that he offers health care benefits.

Keeping those benefits hasn't been easy. Costs have increased about 8 percent to 15 percent each year, he said. Instead of getting a lower-quality plan, he has asked his employees to pay for their spouses' coverage.

"We're a small business and it's a burden," he said.

Part of the headache comes from the amount of time it takes to find the right coverage, Fong said.

"There are so many angles where you have to take care of your business, but you also have to find out the proper coverage of insurance, how much you need, escalating costs and which are better quality health care providers," he said.

Fong said operating in California does have its perks.

"We live in a very luxurious state and California itself draws people," he said. "It's not that hard to do business here. I'm already looking for more staffing right now, and I'm planning to invest in land."

California's way of life is central to Jack Williams' success. The operator of four Smog 'N Go stores in Elk Grove, Rocklin and Fair Oaks, he depends on the state's 34 million vehicles and their owners' longtime love affair with the automobile.

"It's a huge market and we've been blessed," he said. "The business environment is great, but we deal with a lot of restrictions. We have to watch what we're doing."

That includes state regulations and insurance costs. If he doesn't keep on top of workers' comp insurance, Williams said it could drive him out of business.

"As a businessman, I'm very cognizant of that," he said. "In my line of business, it's much more expensive. Using my business sense, I do research to keep costs at a minimum."

Williams has 21 employees and said he pays for half of their health benefits.

"I really feel it's important," he said. "I hate to see people not have health insurance."

Although Fernandez, the West Sacramento financial consultant, does not pay for his employees' health benefits anymore, they can get a discount by going through his own provider.

"This saves them money, but as an employer, I feel bad not being able to have that as a benefit for an employee," he said.

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Copyright (c) 2006, The Sacramento Bee, Calif.

Distributed by Knight Ridder/Tribune Business News.

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Karachi:UNBL,

Source: The Sacramento Bee

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