Small business owner, health insurance expert?

CINCINNATI (Reuters) - Mike Cavanaugh is an electrician by trade, but once a year he immerses himself in the U.S. health insurance industry in an increasingly futile search for affordable medical coverage for his 25 employees.

"I'm not necessarily qualified to make the best decision for all these employees about the best prescription plan, the best co-pays, but I've got to do it," said Cavanaugh, president of Queen City Electric in Cincinnati.

"Health insurance is my single largest cost in benefits, and costs are rising by a minimum of 15 percent a year ... so I shop around every year."

While much of the focus on America's troubled health care system has focused on the struggle by big business to contain soaring costs, America's 25 million small businesses -- employing 52 percent of America's private-sector workforce -- are far less likely to offer employees any insurance at all.

Only 60 percent of firms with between 3 and 199 employees offer health insurance, down from 68 percent in 2000 and well below the 98 percent coverage offered by large firms, according to the nonprofit Kaiser Family Foundation.

As a result, self-employed and small business owners, their employees and families make up 27 million of the America's 45 million uninsured, making health insurance the most coveted benefit for Americans in the job hunt.

With premiums for family coverage up 87 percent nationally since 2000, employers like Cavanaugh say they have been forced to cut coverage wherever they can.

Five years ago Cavanaugh covered 100 percent of his employees' premiums, but has cut that to 80 percent for single employees and 60 percent for family coverage. That still cost him about $55,000 in 2006. His employees pay the rest.

"Health care is such a pain in the butt," said Doug Holthaus, an electrician who's worked for Cavanaugh since 2000. He pays about $200 a month in premiums to cover himself, his wife, and teenage son and daughter.

Holthaus, 43, said Cavanaugh's constant search for cheaper insurance is the biggest pain, since it means employees may have to change doctors or learn a new claims process.

"Mike's got to do what he's got to do, but it's a vicious circle ... after a year or two the insurers jack the rates and the company wants to look elsewhere. And we change again."

GOVERNMENT HELP? YES! NO!

Small businesses often lack leverage to get the best deal on insurance, said Michelle Dimarob, a health care lobbyist at the National Federation of Independent Business, and their smaller risk pools can work against them.

"If you've got six people and one person gets cancer, it's going to affect your policy and premium a lot more than if one person at a 600-person company gets sick," Dimarob said.

The paperwork battle and complexity of comparing insurance plans can also overwhelm small business owners, said Kaiser Family Foundation analyst Gary Claxton.

"Larger firms have employee benefits managers and a broker working for them, maybe a benefit consultant, but for small firms these things are really very complicated," Claxton said.

Still, while small business owners say they'd like to get out of the insurance business altogether, they're as divided as ordinary Americans over the prospect of universal health care, and health care reform promises to be one of the most hotly debated topics of the 2008 presidential election.

One survey by the conservative NFIB found 70 percent of small business owners did not want the government to take over health care, while a separate survey by the left-leaning Small Business Majority found nearly the opposite, with 63 percent supporting a comprehensive national health system.

Daniel Turner, president of Turner Consulting Group in Washington, said most of his 29 employees rely on him for health insurance. But while he once paid 100 percent of the premiums, he now caps his monthly contribution at $300. Single employees have to come up with another $50, while those with families pay another $650 a month.

With health care costing him about $90,000 a year, Turner supports the establishment of a national health care system that would provide basic care for all and extras for those who can afford it. But he's not optimistic it will ever happen.

"I keep hoping the government will do something intelligent, but I don't know if it will happen in my lifetime. I just have to muddle through. I'll have to pay my employees less. It's tough," said Turner, 35.

Other business owners disagree. Sherry Pymer, co-owner of Ohio-based Pymer Plastering, said she'd "be very very afraid" of universal health care, because she's heard patients get poor care in other countries.

Pymer pays 100 percent of her employee premiums at a cost of about $74,000 a year -- for just eight employees. But she's raised the deductible so that singles have to pay for the first $1,000 in care each year, while families have to reach $3,000 in expenses before their insurance kicks in.

Since she doesn't want the government to step in, Pymer has resigned herself to high costs to keep her workers happy.

"We're a 121-year-old company and we need good employees," said Pymer. "This is what we have to do to keep them."