The Herald, Sharon, Pa.

Business

March 8, 2010

Heath care costs, taxes top Pennsylvania business woes

PITTSBURGH — Pennsylvania’s small businesses say rising health care costs, along with the recession and business and personal taxes are the biggest challenges they will face this year, according to a recent survey.

“It really confirms that in Pennsylvania, we need to zero-in on health care costs and taxes,” said Thomas Henschke, acting president of the SMC Business Councils, a Churchill-based trade association that conducted the Small Business State Opinions survey in February. SMC represents about 5,000 businesses throughout western and central Pennsylvania.

About 71 percent of the 250 businesses that responded to the survey said health care costs were their biggest challenge. More than 70 percent said that high business and personal taxes were a moderate-to-severe challenge to their business.

Increases in health care costs — ranging between 7 and 12 percent a year — are a “huge problem” for small business that isn’t being addressed by politicians in Washington, said Peter Cady, president of Command Systems Inc. of Oakmont. The company operates Advanced Mining Service, which repairs and sells coal mining equipment.

“You can’t pass those costs along. Nobody wants to hear that your health care costs went up,” Cady said.

In response to a 23 percent jump in health care costs four years ago to cover about 55 employees, Command Systems moved to a high-deductible insurance plan, which makes it partially self-insured. Command Systems pays 99 percent of the insurance costs for its employees, Cady said.

In addition to health care, the poor state of the economy was cited as a severe challenge by about 45 percent of the respondents.

“Even before the recession, Pennsylvania was a very difficult place to operate a business,” compared to the neighboring states, Henschke said.

The survey was released the same day that President Obama announced his latest version of health care reform.

“That’s politics. This is reality,” Henschke said. “Proposed reforms change daily, and you can’t find anything that is going to lower costs.”

Small-sized employers often believe they are overpaying for health insurance for employees. But self-insurance for their work force is really not available because the pool of covered employees is “too small to spread the risk out,” said Vincent Wolf, executive vice president of Cowden Associates Inc., a Downtown-based health care benefits consulting firm.

Health care costs are a major concern for businesses, which is driving their need to make changes in health care plans, said Lorin Lacy, principal for the health and productivity practice at Buck Consultants Inc., a Downtown-based human resources consulting firm. Those changes include revising cost-sharing between employees and employers and the use of wellness programs, Lacy said.

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