Businesses: Health care costs stymie expansion

What's the biggest hurdle to growth for businesses today?

Clue: It's not the economy.

For about 180 employers polled in a survey commissioned by HealthPartners, health care costs for employees emerged as the most-common obstacle to business expansion, more than the economy itself, access to funding or flaccid consumer demand.

Twenty-one percent of employers cited affordable health care as an obstacle to expansion, with government regulations next (12 percent), followed the by economy (11 percent). Global competition trailed at 5 percent.

The survey was commissioned to try to figure out what local businesses were thinking at a time when the federal government was pushing through a huge health reform bill. That bill is now in limbo, and President Obama has swung his attention to job creation.

The HealthPartners survey was more proof, if any was needed, that both issues are joined at the hip.

"Affordable health care is a challenge and Minnesota businesses, along with businesses around the country, are struggling," said Andrea Walsh, chief marketing officer at HealthPartners, the third-biggest health insurer in Minnesota.

Almost two-thirds of companies said health costs jumped 10 percent or more in the past two years, with a quarter reporting costs surging by more than 20 percent. A tiny minority -- just 3 percent -- said health costs declined.

Separately, the government said this week that health care consumed a record 17.3 percent of all spending in the U.S. economy last year -- roughly $2.5 trillion.

According to the HealthPartners survey, employee lifestyle was a big reason costs went up. Seventy-one percent of employers said their workers had poor health habits -- not exercising enough, not eating enough fruits and vegetables, smoking.

Cost shifting

Employers are resorting to a variety of tactics to lighten their health costs. About 60 percent are increasing employees' share of costs through higher premiums, co-pays or deductibles.

Employers realize they "simply can't keep moving the dollars around," Walsh said. HealthPartners plans to use the results of the survey to tweak its health plan offerings, including incentives for members to live healthier lifestyles. Half the employers surveyed were HealthPartners clients and half were not.

Some companies -- faced with a choice of jobs or health benefits -- simply choose jobs.

Silva Screenprinting & Distribution in Minneapolis' Warehouse District makes apparel sold at retailers such as Wal-Mart and has annual revenue of $1.5 million. The owners don't provide health insurance but always thought they would one day.

Three years ago, they called a meeting of all 25 employees.

They were ready to start offering health benefits, they said. But the trade-off was the loss of three people's jobs. The employees were asked to vote whether to go ahead.

Today, the company has grown to 32 employees. They still have no health insurance.