ISSUE BRIEF SEPTEMBER 2019 Small-Business Owners’ Views on Health Coverage and Costs Rhett Buttle Katie Vlietstra Wonnenberg Angela Simaan Founder and Principal Principal Senior Communications Advisor Public Private Strategies Public Private Strategies Public Private Strategies ABSTRACT TOPLINES ISSUE: For years, small-business owners have faced rapidly escalating Rising health care costs are a health care coverage costs, which affects their employees, their business, top concern for small-business owners. and the economy. GOALS: To better understand employers’ perspectives on health care Small-business owners support costs and to develop a targeted strategy for engaging and mobilizing to a broad range of solutions — drive down costs and improve health outcomes. including market-based METHODS: Key informant interviews, focus groups, and a nationwide and regulatory — to curb climbing health care costs. survey. KEY FINDINGS: Despite a healthy economic period, rising health care costs represent a major burden for small-business owners. As a result, most are taking steps to cut costs and would look favorably on policy changes that would help curb the cost of providing health care coverage to employees. Their preferences are not ideological; policy prescriptions across the spectrum find favor. There is significant interest in banding together with other business owners to advocate for a different approach to health care. CONCLUSION: The weight of health coverage and costs threatens the competitiveness of small businesses. There are many health policy solutions that would help small businesses. Small-Business Owners’ Views on Health Coverage and Costs 2 INTRODUCTION Only small-business owners who offered health insurance There are an estimated 30.7 million small businesses to their employees and who had two or more employees (defined as those with fewer than 500 employees) were included in the focus groups and survey. In both focus in the United States, employing approximately 60 groups, about a third of the participants reported having 26 or more employees. In the survey of small-business owners million people.1 Small firms make up 99 percent of U.S. who provide health care to their employees, about a third of employers, and these businesses create 66 percent of new the respondents reported having 26 or more employees. private-sector jobs.2 Small businesses, like their larger counterparts, have not been shielded from the increasing cost of health care. Without advantages such as a larger KEY FINDINGS pool of insured employees, more bargaining power with health insurance companies, and the benefit of full-time Small-business owners are doing well and are human resources personnel, small-business owners are optimistic about the future. often left with little recourse and few options when a Most small-business owners in the survey rated current health insurance carrier hikes costs. economic conditions highly (76%) (data not shown). Their businesses are doing well — 85 percent described them as Small-business owners meet critical needs for excellent or good. The larger the business, the more likely communities, employing more than 47 percent of the owners were to report good conditions and a positive private-sector workforce and accounting for about outlook for the next year. one-third of America’s export value.3 This importance requires policymakers to consider the needs and unique Health care cost is a major problem. circumstances of small-business owners. Further, the American public trusts small business as an institution. The survey reveals that health care costs are top of mind Gallup found that 70 percent of Americans have high for small businesses. When asked to choose their top two confidence in small business, compared to just 21 percent challenges, they cited the cost of providing health coverage who feel similarly about larger businesses.4 As trusted to employees and attracting new customers (Exhibit 1). local pillars, they have the ears of policymakers invested in Not surprisingly, the cost of providing health coverage to small-business owners as a constituency. employees looms larger the smaller the business, but this We saw the power of small-business support during the issue plagues businesses regardless of size (Exhibit 2). passage of the Affordable Care Act (ACA), when business The price tag on health insurance is a significant pain owners played a significant role in building critical point for small employers. The problem extends to support for several portions of the law, such as the small- recruiting and retaining talent. To compete with larger business health care exchange. Throughout the debate, employers, small employers are hard-pressed to offer small-business owners were called upon to talk about benefits like health insurance, even as the benefit takes up their difficulties managing health care costs. a larger share of the bottom line. In the first half of 2019, we conducted three phases of Two-thirds of businesses (69%) said the problem has been research (key informant interviews, two focus groups, getting worse. They reported that costs have increased and a national survey of 500 small employers) to better over the last four years; one-third of this group reported understand small employers’ current thoughts and annual increases of 10 percent or more. Businesses perspectives on rising health care costs and prices, with fewer employees cited bigger increases than larger their appetite for change, and any levers they may be businesses. Employers cited prescription drugs and lack of willing to use. choice of health care plans as pain points (Exhibit 3). commonwealthfund.org Issue Brief, September 2019 Small-Business Owners’ Views on Health Coverage and Costs 3 Exhibit 1 Exhibit 1. Top Problems Small-Business Owners Top Problems for for Small-Business Owners Which one of these do you consider the biggest challenge facing your business? First- and second-choice answers combined (percent) Cost of providing health care coverage to employees 37 Attracting new customers 33 Rising cost of business, not involving benefits 28 Attracting and retaining quality employees 25 Local, state, and federal taxes 24 Competition with big business and corporations 24 Government regulations 19 Lack of access to credit or capital 9 Data: Authors’ analysis of online nationwide poll of 500 small-business owners who provide health coverage to their employees, Apr. 4–10, 2019. Exhibit 2 Data: Authors’ analysis of online nationwide poll of 500 small-business owners who provide health coverage to their employees, Apr. 4–10, 2019. Exhibitof Cost of Providing Health CareCoverage Is an Issue for Small-Business Owners Cost 2. Providing Health Care Coverage Is an Issue for Small-Business Owners Source: Rhett Buttle, Katie Vlietstra Wonnenberg, and Angela Simaan, Small-Business Owners’ Views on Health Coverage and Costs (Commonwealth Fund, Sept. 2019). Thinking specifically about your business, is the cost of providing health care coverage to employees a major problem, a minor problem, not much of a problem, or not a problem at all? Percent 74 75 72 30 30 33 Minor problem Major problem 44 45 39 Total 2–25 employees 26 or more employees Note: The sample size for small-business owners with 2 to 25 employees is 352 respondents; the sample size for small-business owners with 26 or more employees is 148 respondents. Data: Authors’ analysis of online nationwide poll of 500 small-business owners who provide health coverage to their employees, Apr. 4–10, 2019. Note: The sample size for small-business owners with 2 to 25 employees is 352 respondents; the sample size for small-business owners with 26 or more employees is 148 respondents. commonwealthfund.org nationwide poll of 500 small-business owners who provide health coverage to their employees, Apr. 4–10, 2019. Data: Authors’ analysis of online Issue Brief, September 2019 Small-Business Owners’ Views on Health Coverage and Costs 4 Exhibit 3 Exhibit 3. Biggest Challenges to ProvidingHealth Care Coverage Biggest Challenges to Providing Health Care Coverage Outside of costs, which one of the following do you consider the biggest challenge when it comes to providing health care coverage to your employees? First- and second-choice Top answer answers combined (percent) (percent) Lack of choices in health care 43 Rising cost of prescription drugs 25 plans Lack of choices in health care Rising cost of prescription drugs 40 plans 23 Changing government rules and Changing government rules and 36 regulations 18 regulations Inability to get clear, unbiased Inability to get clear, unbiased information/data to make information/data to make 14 32 purchasing decisions purchasing decisions Time required for Time required for 27 administration/paperwork 11 administration/paperwork Finding in-network doctors and Finding in-network doctors and 9 23 hospitals hospitals Data: Authors’ analysis of online nationwide poll of 500 small-business owners who provide health coverage to their employees, Apr. 4–10, 2019. Data: Authors’ analysis of online nationwide poll of 500 small-business owners who provide health coverage to their employees, Apr. 4–10, 2019. Focus group findings also revealed that many small- Health care brokers have a large impact on the business owners make painful decisions around health and Angela Simaan, Small-Businesshealth benefits. Source: Rhett Buttle, Katie Vlietstra Wonnenberg, selection of Owners’ Views on Health Coverage and Costs (Commonwealth Fund, Sept. 2019). care quickly, often because they lack choice or the time or When asked what resources they have used to make resources to wade through the policy information. Without benefit selection decisions, including choosing plans, the a human resources professional on staff, small-business most-used resource was health care brokers (69%). The owners then often have to take more time later to find an next-most used resource was an internal human resource alternative when a health care plan becomes too costly. department (43%). Small-business owners view health care brokers as helpful (92%); more than half (51%) said Small-business owners have taken active steps to health care brokers are very helpful (data not shown). lower their own health care costs. Over half of employers say they have made adjustments in Employers don’t believe there is a clear culprit. the past four years to decrease the costs of providing health care, with many shifting the cost burden onto employees. Nearly all small-business owners believe all parties — Nearly half said they have increased deductibles or pharmaceutical companies, health insurance companies, copayments for their employees, one-quarter required the federal government, and health care providers — are employees to pay higher premiums, and 16 percent either at least somewhat responsible for rising health care reduced or eliminated dependent coverage (Exhibit 4). In costs. Pharmaceutical companies and health insurance addition, 29 percent of small-business owners negotiated companies get the most blame, with 60 percent or more with their current carriers and slightly more than finding both very responsible for rising health care one-quarter changed carriers. One-third have considered costs, 15 to 20 percentage points more than the federal discontinuing health care coverage for their employees. government and health care providers (Exhibit 5). commonwealthfund.org Issue Brief, September 2019 Small-Business Owners’ Views on Health Coverage and Costs 5 Exhibit 4 Adjustments Made by Small-Business Owners Exhibit 4. Adjustments Made by Small-Business Owners Which of the following actions have you taken or adjustments have you made to decrease the cost of providing health care coverage to your employees? Percent Increased deductibles or copayments for your employees 48 Negotiated with current carrier for lower rates 29 Changed carriers 27 Required your employees to pay higher premiums 25 Reduced or eliminated dependent coverage 16 Other 3 Data: Authors’ analysis of online nationwide poll of 500 small-business owners who provide health coverage to their employees, Apr. 4–10, 2019. Exhibit 5 Exhibit 5.for onlinefor Rising Health Care Costs health coverage to their employees, Apr. 4–10, 2019. Blame Blame Data: Authors’ analysis of Rising Health Care Costs nationwide poll of 500 small-business owners who provide Below are groups that someKatie Vlietstramight say are responsible for the risingon Health Coverage and Costs health care. Source: Rhett Buttle, people Wonnenberg, and Angela Simaan, Small-Business Owners’ Views costs of providing For each group, please indicate how much responsibility you think they have for those rising costs. (Commonwealth Fund, Sept. 2019). Percent Very responsible Somewhat responsible Pharmaceutical companies 61 27 88 Health insurance carriers 60 31 91 Federal government 46 37 83 Health care providers, like doctors and hospitals 39 45 85 Note: Segments may not sum to total because of rounding. Data: Authors’ analysis of online nationwide poll of 500 small-business owners who provide health coverage to their employees, Apr. 4–10, 2019. Note: Segments may not sum to total because of rounding. commonwealthfund.org nationwide poll of 500 small-business owners who provide health coverage to their employees, Apr. 4–10, 2019. Data: Authors’ analysis of online Issue Brief, September 2019 Source: Rhett Buttle, Katie Vlietstra Wonnenberg, and Angela Simaan, Small-Business Owners’ Views on Health Coverage and Costs Small-Business Owners’ Views on Health Coverage and Costs 6 Small-business owners support broad change. Small-business owners demonstrate an interest Ideologically, many employers prefer private-sector in advocating for themselves. solutions to government solutions. Yet all options About two-thirds of small-business owners surveyed provided to curb costs — both market-based and have already spoken with other owners about health care regulatory options — find support among business costs, and 92 percent are willing to work together to push owners. This includes solutions considered either for changes to make health care more affordable. Nearly conservative or liberal. Indeed, the same constituency half (49%) said they were very willing to do so (data not that supports cuts in regulations and bureaucracy also shown). supports a national single-payer health plan. Proposals However, business owners are also discriminating in that address the rising cost of prescription drugs are the kind of advocacy they are willing to participate particularly popular among small-business owners, in. They are mixed about phone banking federal or including several ideas that are currently being deliberated state representatives and averse to hiring an advocacy in Congress (Exhibit 6). firm. Instead, they are more willing to be part of an When asked about specific solutions, respondents said organization that offers group health insurance and that allowing small-businesses to purchase their health advocacy and to join a volunteer association where they insurance together to gain market power, efforts to discuss ways to control costs with others (Exhibit 8). increase transparency, access to unbiased information, and accountability for brokers would be helpful (Exhibit 7). Exhibit 6 Exhibit 6. Proposals to Control Health Care Costs Proposals to Control Health Care Costs Below are suggestions some people have made to reform health care in this country. For each solution, please indicate whether you support it or oppose it. Percent Strongly support Somewhat support More generic drugs to come to the market 60 30 90 Pharma companies to disclose the “list price” of drugs 56 32 88 Cap out-of-pocket patient expenses 50 35 85 Reduce regulations and bureaucracy rules governing health insurance 48 32 80 Make it easier to import drugs from Canada 47 35 82 Allow government to negotiate directly with drug companies 46 33 79 (SPLIT) Create a national-government-administered health plan 38 32 70 Allow employees to buy into Medicare or Medicaid 35 38 73 (SPLIT) Have Medicare for All 34 24 58 Limit or prevent consolidation in health care 26 41 67 Note: A split sample divides respondents into two groups in order to gauge responses when there are variations of an option. Data: A split sample divides respondents into two groups in order to gauge responses when there are variations ofcoverage to their employees, Apr. 4–10, 2019. Note: Authors’ analysis of online nationwide poll of 500 small-business owners who provide health an option. Data: Authors’ analysis of online nationwide poll of 500 small-business owners who provide health coverage to their employees, Apr. 4–10, 2019. Source: Rhett Buttle, Katie Vlietstra Wonnenberg, and Angela Simaan, Small-Business Owners’ Views on Health Coverage and Costs commonwealthfund.org (Commonwealth Fund, Sept. 2019). Issue Brief, September 2019 Small-Business Owners’ Views on Health Coverage and Costs 7 Exhibit 7 Exhibit 7. Proposals to Control HealthCareCosts for Your Business Proposals to Control Health Care Costs for Your Business Thinking about your own business, for each of the following solutions please indicate whether that solution would be helpful for you to reduce health care costs. Percent Very helpful Somewhat helpful Allowing small businesses to purchase health insurance together 62 30 92 to have more market power Providing more transparency to the public on health care prices 59 33 92 Giving employers more unbiased information on how to choose 54 37 91 the best plans Requiring brokers to put their clients’ 54 36 90 financial interests first Data: Authors’ analysis of online nationwide poll of 500 small-business owners who provide health coverage to their employees, Apr. 4–10, 2019. Data: Authors’ analysis of online nationwide poll of 500 small-business owners who provide health coverage to their employees, Apr. 4–10, 2019. Exhibit 8 Source: Rhett Buttle, Katie Vlietstra Wonnenberg, and Angela Simaan, Small-Business Owners’ Views on Health Coverage and Costs Exhibit 8. Small-Business Owners Banding Together Small-Business Owners Banding Together (Commonwealth Fund, Sept. 2019). Below are some types of ways you would be able to join with other small-business owners in your community and state in order to push for changes in the health care system to make health care more affordable. Please indicate for each method whether or not you would be willing to participate in that way. Percent who answered “yes” Volunteer association of small-business owners 78 Organization that offers group health insurance 59 Organize a phone bank 50 Collectively hire advocacy firm 43 Data: Authors’ analysis of online nationwide poll of 500 small-business owners who provide health coverage to their employees, Apr. 4–10, 2019. commonwealthfund.org Issue Brief, September 2019 Small-Business Owners’ Views on Health Coverage and Costs 8 DISCUSSION CONCLUSION Common themes emerged from this research that are This research reaffirms what both policymakers and aligned with anecdotal evidence and commonly held stakeholders know to be true: health care costs are taking understandings and assumptions about the health care a toll on small businesses in terms of money and time. cost burden of small employers. Primarily, it is clear that Small-business owners often lack a human resources health care costs are arguably the major concern for small professional or the personnel enjoyed by their large businesses. Though small employers report taking steps competitors. They often make decisions quickly and then to reduce the burden, often by shifting some of the costs have to take more time down the road to adjust a health onto their employees, few have considered dropping plan that has grown too costly to continue. coverage altogether. Small-business owners are taking steps to alleviate the Increasing health care costs is not sustainable for small problem. Unfortunately, without policy action their tools employers. They want change and are willing to take remain limited. They need support from policymakers to pragmatic steps. This desire for change does not adhere to address the issue in a way that ensures they can continue party lines; across the ideological spectrum, small-business to compete and employ millions of Americans in the owners are open to a range of possible solutions. Those future. For policy and lawmakers looking to support small favored by small employers require legislative action, employers, the time to act on health care is now. primarily at the federal level, to help small employers affordably provide health insurance to their employees. Surprisingly, there was an openness to concepts that might be construed as extreme, like Medicare for All or a single-payer system. Other options, such as a Medicare or Medicaid buy-in, also found favor. Though business owners tend to be a conservative group, we did see an unexpected and almost apolitical frame on the issue of health care. Small-business owners did not ascribe blame to one actor or the other. They saw solutions as independent of party of origin, signaling an interest in policy and action from policymakers rather than a strict adherence to political ideology. However, it is important to note that support for various solutions presented in the survey could erode when probed further. Additional research may be necessary to further substantiate which solutions small-business owners most support. The survey also highlighted the importance of the role of health insurance brokers in decision-making for millions of Americans. In the survey, small employers were generally positive — and at times enthusiastic — about their brokers. However, the informant interviews revealed a mixed assessment, with more focus on the role brokers play in the industry. Some employers raised concerns about brokers’ priorities and the potential need for solutions that ensure they put their client’s financial interests first. commonwealthfund.org Issue Brief, September 2019 Small-Business Owners’ Views on Health Coverage and Costs 9 HOW WE CONDUCTED THIS STUDY We conducted qualitative and quantitative research The second phase of research was two online panel among small-business owners in early 2019. The first focus groups conducted by GQR in partnership with phase of research included 45-to-60-minute phone Public Private Strategies on February 11 and 13, 2019, or in-person informant interviews with stakeholders with small-business owners who provide health coverage representing individual small-business owners, business to their employees. In both groups, about a third of the associations, health care policy experts, and health care participants had 26 employees or more. There was a brokers. These interviews were conducted in January fairly wide distribution geographically, with 28 percent and February 2019. of respondents from the Western U.S., 33 percent from the South, 19 percent from the Midwest, and 21 percent Key informants included: from the Northeast. The group included a majority of • Anne Zimmerman, CPA: Zimmerman & Co suburban businesses (about three-quarters of the overall CPAs, Cincinnati, Ohio participant group), 21 percent were urban, and a small • Lisa Goodbee, PE: Goodbee Associates, number of rural business owners. Republicans slightly Denver, Colorado outnumbered Democrats in these groups. • Jamil Poonja: Stride As is always the case, focus group findings are not • David Chase: Small Business Majority statistically projectable, but the open-ended comments • Todd McCracken: National Small Business provide insight and dialogue that would be impossible to Association pull out of a quantitative survey. • Chris Hartmann and Marci Buckner: National Association of Health The third phase of research was an online nationwide Underwriters survey of 500 small-business owners who provide health coverage to their employees conducted by GQR • Bob Galvin: Blackstone in partnership with Public Private Strategies that was • Frank Knapp: South Carolina Small fielded from April 4 to 10, 2019. Respondents surveyed Business Chamber of Commerce in this poll are from across the nation: 18 percent from • Kelly Brough, Abram Sloss, Holli Riebel, the Northeast, 21 percent from the Midwest, 37 percent and Laura Giocomo Rizzo: Denver Metro Chamber of Commerce from the South, and 24 percent from the West. Forty- seven percent of respondents identified as Republicans, • Don DePerro: Greater Columbus Chamber of Commerce 39 percent identified as Democrats, and 11 percent identified as independent of either party. About a third of the respondents have 26 or more employees. Because the online sample is based on those who initially self-selected for participation in the panel rather than a probability sample, no estimates of sampling error can be calculated. commonwealthfund.org Issue Brief, September 2019 Small-Business Owners’ Views on Health Coverage and Costs 10 NOTES ABOUT THE AUTHORS 1. U.S. Small Business Administration, Office of Advocacy, Rhett Buttle is founder and principal at Public Private “2019 Small Business Profile,” SBA, 2019. Strategies. Before founding Public Private Strategies, Mr. Buttle served as a business advisor to Secretary of State 2. U.S. Small Business Administration, Office of Advocacy, Hillary Clinton, Health and Human Services Secretary “What’s New with Small Business,” 2018. Sylvia Burwell, and was a member of the White House Business Council. Mr. Buttle is also a senior fellow at the 3. SBA, “What’s New,” 2018. Aspen Institute. 4. According to an August 2017 Gallup poll, 70 percent Katie Vlietstra Wonnenberg is a principal at Public of Americans have confidence in small business. Private Strategies, with 15 years of government relations See Frank Newport, “Business Gets Bigger Even as and public affairs experience. She provides high-level Americans Prefer Small,” Polling Matters (blog), Gallup, strategy and leadership in support of Public Private Aug. 22, 2017. Strategies’s work streams. Ms. Vlietstra Wonnenberg is also vice president for government relations and public affairs for the National Association for the Self-Employed, directing the association’s federal advocacy and public affairs strategy in representing the 30 million self- employed. Angela Simaan is senior communications advisor at Public Private Strategies, with more than 10 years of experience in strategic communications, media relations, public policy, and project management. Ms. Simaan has led communications teams for both public and private organizations, and was previously a broadcast journalist with CNN, Al Jazeera English, and Al Arabiya News in Washington, D.C.; a digital editor with the Qatar Museums Authority; and the chief editor of the first bilingual arts and cultural magazine in Doha, Qatar. Editorial support was provided by Deborah Lorber. For more information about this brief, please contact: Rhett Buttle Founder and Principal Public Private Strategies rhettpublicprivatestrategies.com commonwealthfund.org Issue Brief, September 2019 Small-Business Owners’ Views on Health Coverage and CostsHow High Is America’s Health Care Cost Burden? The Commonwealth Fund 11 APPENDIX Large-Scale Solutions Adopt policies that increase competition by encouraging more generic drugs to come to the market. Reduce regulations and bureaucracy rules governing health insurance carriers and health care providers. Make it easier to import drugs from Canada. Limit or prevent consolidation in health care. (SPLIT) Create a national government–administered health plan similar to Medicare open to anyone, but one that would allow people to keep the coverage they have. (SPLIT) Have a national health plan, sometimes called Medicare for All, in which Americans would get their insurance from a single government plan. Adopt policies that increase competition by encouraging more generic drugs to come to the market. Allow the government to negotiate directly with drug companies on drug prices for Medicare, rather than relying on pharmacy benefit managers. Cap out-of-pocket patient expenses. Require pharmaceutical companies to publicly disclose the manufacturing cost or “list price” of drugs. Note: A split sample divides respondents into two groups in order to gauge responses when there are variations of an option. Data: Authors’ analysis of online nationwide poll of 500 small-business owners who provide health coverage to their employees, Apr. 4–10, 2019. commonwealthfund.org Issue Brief, September 2019 About the Commonwealth Fund The mission of the Commonwealth Fund is to promote a high-performing health care system that achieves better access, improved quality, and greater efficiency, particularly for society’s most vulnerable, including low-income people, the uninsured, and people of color. Support for this research was provided by the Commonwealth Fund. The views presented here are those of the authors and not necessarily those of the Commonwealth Fund or its directors, officers, or staff.