'When I started offering health benefits in 1994, the cost was low enough that I paid 100 percent of the premium for a good plan. Now the cost has tripled, we only pay 50 percent, and still we have had to switch to a high-deductible plan. We're seeing employees put off preventive care that's going to cost them money.'
— Michael Brey, 45, of Annapolis, Md., owner of Hobby Works stores
Photo by Melanie Eve Barocas

The proportion of small-business employees who have health insurance at work dropped from 58 percent in 2001 to 52 percent last year, according to the Kaiser Family Foundation.

If you're wondering why, just ask Michael Brey. He is president and CEO of Hobby Works, a chain of four hobby-supply shops in Maryland and Virginia. Like most business owners, Brey, 45, wants to give his employees good coverage. But his health premiums have gone up 31 percent in the past three years, despite his switch to a high-deductible plan. He says the burden on the company and employees has grown, and many employees are dropping out of the plan.

"At one time, I believed that having more skin in the game"— paying a larger share of costs out-of-pocket—"would force people to be smarter health consumers," Brey says. "But in practice, that's not what happens. Cost-shifting drives them to put off preventive care in favor of urgent care." So they get help in the most-expensive, least-effective way—after they're sick, rather than while the illness might be avoided.

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Small-business owners remain the job-growth engine of the economy. Brey, for example, wants to expand his chain of stores. But health-care costs make it more expensive to add employees. And in today's economy, that could mean little or no growth. Under the health-care reform that we support, small firms that couldn't otherwise afford coverage could buy it—with a subsidy, if needed—through the same National Health Insurance Exchange available to individuals. The price they would pay wouldn't depend on the health of their workers, as it does today. And insurers couldn't jack up the cost if an employee or family member got sick.

The results? Better care for employees and fewer obstacles for entrepreneurs who want to build a business.