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Health benefits challenge many smaller businesses in Delta

With the defeat of Senate Bill 1955 by the U.S. Senate on Insurance Marketplace Modernization and Affordability Act of 2006, the issue of what to do about providing affordable health insurance for employees remains both in question and in doubt.

Most small business owners in this country with fewer than 10 employees do not provide medical or health insurance for their employees. It’s not because they don’t want to but more because they can’t afford it.

More than 60% of new small business startups fail within the first year, according to the U.S. Small Business Administration. And if the small business community had to provide health insurance coverage at current rates for employees, that failure rate would increase significantly.

And for agricultural operations — especially in the Mississippi Delta — added health insurance expenses for full-time or long-term employees would increase an already thin profit margin.

With more than 29 million Americans not covered by any employment insurance plan, and around 45 million Americans going to work everyday — including the self-employed — with no insurance coverage, health insurance has become a crisis situation with little resolution in sight.

In Mississippi, the U.S. Small Business Administration reports in its 2003 statistics that there were 59,827 business establishments in the state.

Of that amount, 22,240 such establishments had one to four employees. Another 8,749 had between five and nine employees and 5,226 had between 10 to 19 employees.

Those figures translate into 60.5% of all business establishments in the state — including agricultural operations and farms — with fewer that 20 employees.
Of that amount, only around 15% would have any kind of health insurance coverage for its employees, reports the Mississippi Department of Insurance.

“Health insurance for small businesses is a continuing concern,” said George Dale, Mississippi Insurance Commissioner. “With skyrocketing health, medical and prescription costs, it makes it very difficult for small businesses to provide affordable health coverage.”

“That’s it pretty much in a nut shell,” said E.E. “Bubba” Tollison with Tollison Insurance Inc. in Ruleville. “Agriculture has suffered a lot over the years. And now to pay the kinds of costs companies want to charge for health insurance, well, it’s out of the reach of most farming operations.”

Tollison said farming operations have farm liability coverage and many are covered by workers’ compensation.
But just like farming operations and small businesses that have to deal with the premiums companies want to charge, some insurance companies are declining to write further farm liability coverage with health insurance attached.

“A lot of companies are not doing those coverages anymore. They are eliminating or reducing that coverage so as to reduce or limit exposure,” said Tollison.

An average policy per employee would provide $100,000 to $500,000 in coverage, which for a small farmer with one or two employees, could cost an additional $500 to $1,000 a month to the operating costs of the farm. That would be between $6,000 to $12,000 a year in health insurance coverage.

“That would be a minimum,” said Tollison. “Most operations carry a minimum of $500,000 in coverage with between $3 to $5 million coverage in farm liability insurance in an umbrella coverage policy. Really the best coverage is worker’s compensation,” he said.

Billy Hopkins, agency manager for the Coahoma/Tunica County Farm Bureau, agrees with Tollison.

“Health insurance costs are so prohibitive for small businesses when it comes to covering employees,” said Hopkins. “Most employees in farming operations and small businesses are part-time employees. That means they work less than a 40-hour workweek. Workmen’s compensation or general liability is what would be used if they were hurt on the job rather than a health insurance policy,” Hopkins said.

“I don’t know what the solution is,” he added. “But health insurance costs for small businesses would be so cost prohibitive now that most simply can’t afford it. I think, though, that if they could afford it they would probably provide it.”

Retired Metcalfe-area farmer Harley Metcalfe III of Greenville said he would had provided it for his few employees if he could have afforded it.

The Metcalfes have been farming in the area near the Mid-Delta Regional Airport since around 1855 with approximately 1,400 acres in the farm today.

They’ve seen a lot of changes over the decades including price increases in fuel costs, fertilizer, equipment upgrades and technological advances in farming operations. But the rise in healthcare costs has really taken a spiral when it comes to the cost-benefit ratio of a farming operation’s bottom line.

“It’s crazy what’s happened with health insurance costs,” said Metcalfe. “It’s so expensive. I don’t know how anyone can really afford it.”

The Metcalfe’s haven’t provided health insurance in the traditional sense but instead “we’ve paid for doctor visits and doctor bills along with prescription costs. That’s what we felt we could afford. If we could have gotten health insurance at a reasonable rate, then we would have gotten it.”

“If we had provided health insurance for all our employees, it would have put us in the red for a number of years. You have to keep your costs down as much as possible or you won’t be in business very long and then no one will have a job,” said Metcalfe.

Harry “Bud” W. Branton, vice president of Tribbett Farms south of Leland, agrees with Metcalfe.

“The cost of health insurance is so expensive that’s it’s just not feasible for most farming operations,” said Branton.

With around 3,000 acres in cultivable land and another 600 acres in catfish production, Tribbett Farms is no small operation.

“Farm costs keep rising and so do health insurance costs,” said Branton. “Something needs to be done to help out in this area.”

Mike Boyle and his wife run Yarber’s Flowers and Gifts in Greenville with only the two of them, one other full- time employee and a couple of part-time employees.

Since Yarber’s has three full-time employees, including the Boyles, they qualify as a group according to Blue Cross-Blue Shield of Mississippi.

“Three makes a group and that’s the only way we can afford it,” said Boyle who pays a high deductible and a $300-a-month premium. “We can make it affordable with the high deductible and the premium but it’s still expensive to do business. The insurance companies don’t make it easy for small businesses.”

While the cost of health insurance is almost prohibitive, Boyle said he would be willing to pay an employee more per hour so that they could get the insurance they needed with the extra pay.

“That’s one way to do it. I don’t know how a small business could even begin to pay the premiums being charged by insurance companies. It’s crazy but you have to have some kind of health insurance,” he said.

Mary Hobart, president of Hobart Learning Company in Greenville, has two full time employees, which includes herself and another woman who worked for the State of Mississippi for 33 years.

“Health insurance is very expensive even for a small business like ours,” said Hobart. “It’s hard to get it for yourself because it’s so expensive. Fortunately, my one other employee is already covered by Medicare and a supplement. But I don’t know how small businesses can afford health insurance.”

“We did a survey about a month ago in Ohio,” said Scott Lyon, executive director of group services for the Council of Smaller Enterprises (COSE) in Cleveland. “The average annual increase most business owners reported was in the 20% to 25% range. No increases were under 10%. The last time premium increases were this high, managed care was the answer. This time, I don’t know what the answer is.”

The one remaining hope in Congress was the low-cost insurance bill for small-business employees.

The bill would have let small businesses join together to buy lower-cost medical insurance for workers, and band together across state lines for the purpose of purchasing such coverage.

Nearly half the nation’s 46 million uninsured people own or work in small businesses. Owners have long complained that existing laws put them at a disadvantage when trying to negotiate for better coverage rates the way big companies do.
On the opposing side of the debate was the contention that gains from health insurance savings would have come at the cost of gutting state laws that force insurers to cover a variety of routine medical services. Common examples include coverage for cancer screening, mental health treatment and contraceptives.

Regardless, “we need to do something in Mississippi to help out small business,” Dale said.

Contact MBJ contributing writer David Lush at mbj@msbusiness.com.


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