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Small business owners fear new health care burden

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Sacramento Bee

From afar, Nathan Carnahan has monitored the health care debate unfolding in Washington, D.C. He confesses uncertainty about how it will play out, and fears government mandates could add to his firm’s cost of doing business.

As members of Congress fan out into their districts to lead discussions on health care, small businesses are bracing for profound changes in the role they play in the country’s health care system.

Carnahan’s employer, Rack N Road, sells and installs automobile racks. Last year, the Sacramento firm shuttered two of its 10 stores and laid off employees. To further cut costs, the company even closed its corporate office ? forcing its executives to work from home.

“I still don’t know how it will impact the business,” Carnahan, the company’s director of human resources, said of pending health care legislation. “There’s still so much out there that’s unknown.”

Carnahan wonders whether the plan that emerges will require his company to provide health coverage to 42 part-time employees. “Would it break us? Probably not. But it would make life much more difficult,” Carnahan said.

The company pays about $15,000 monthly to provide medical, dental and vision coverage to 25 full-time employees across its eight locations in California, Washington and Utah. It doesn’t provide coverage to its 42 part-time staffers because of the substantial cost, Carnahan said.

The Obama administration is proposing a sweeping overhaul to address the country’s 46 million people without insurance, nearly 7 million of them in California. Under proposed legislation, businesses would be expected to shoulder some of the burden.

While the majority of Americans in 2007 ? about 61 percent ? already received health insurance through their employers, an estimated 37 million people from working families remained uninsured, because their companies did not provide health coverage, they couldn’t qualify for coverage or they couldn’t afford their share of premiums, according to the Kaiser Family Foundation.

What’s more, financial woes and the rising cost of premiums have prompted more companies to drop health benefits or require employees to pay a greater share of the premiums.

“I don’t know the solution. That’s why the politicians are in their role. I hope they find a solution,” Carnahan said. “Whatever it is, someone’s going to have to pay for it.”

The three leading federal proposals include provisions requiring most employers to provide health coverage to their workers. In addition, firms would have to pay for the bulk of an employee’s health premiums; those that don’t would be subject to penalties.

House Democrats have proposed a so-called “pay or play” proposal that would require companies to pay 72.5 percent of the cost of single-coverage premiums and 65 percent for families. Companies that refuse would be required to contribute 8 percent of their total payroll into a health care trust fund.

Talk of such mandates doesn’t sit well with Carnahan and small business advocates who don’t want to be locked into specific obligations for health care.

“For business reasons, we need the flexibility,” Carnahan said. “We don’t want our hands tied.”

While the smallest companies would remain exempt from providing insurance, business groups argue that the government’s plan to mandate that everyone be insured could put pressure on firms to furnish policies.

Advocates of health care overhaul agree that companies, particularly small businesses, are under increasing pressure in a tight economy. “We’ve seen health premiums rise dramatically, hurting businesses and hurting workers,” said Ken Jacobs, a health care specialist and chairman of UC Berkeley’s Labor Center.

“Overall, small businesses pay higher prices for health care coverage than do their large-business counterparts. They don’t have the bargaining power that large companies do,” Jacobs said.

But Jacobs argues that small businesses could reap benefits from the proposed legislation. He noted that small businesses would be provided subsidies to help provide health coverage to their employees.