SMALL BUSINESSES TO FEEL HEALTH PINCH.

Byline: JULIA M. SCOTT

Staff Writer

Staying in business in the San Fernando Valley is tough enough for Maurice Vanegas -- now he and hundreds of other entrepreneurs have to consider the possibility of mandatory health insurance.

Under Gov. Arnold Schwarzenegger's plan to provide health care for all Californians, businesses with at least 10 employees would have to provide health insurance for workers or contribute 4 percent of their payroll into a state fund.

In Los Angeles County, there are 61,418 businesses with between 10 and 499 employees, according to census figures. In the San Fernando Valley, hundreds of businesses would be affected by the plan.

At Vanegas' Sun Valley company Transit Systems Unlimited, he does not offer his 50-plus workers health care because he needs a system that is fair to full- and part-time employees. He supports universal health care but thinks businesses have already been taxed to the hilt.

"There is only so much you can tax a small-business owner," Vanegas said. He already pays 24 percent of his payroll into workers' compensation, 6.5 percent into Social Security and 6.4 percent into unemployment insurance, he said.

Advocates say Schwarzenegger's plan will fix the "broken" health care system and provide a model for universal care for the nation.

However, the governor's mandate "offends" the basic values of independent-minded business owners, says Michael Shaw, legislative director at the California branch of the National Federation of Independent Businesses, a nonprofit that represents 35,000 businesses in the state.

Instead of requiring insurance, the focus should be on making care affordable and offering incentives to businesses that provide health insurance, he said.

"If you make it affordable, you are already going to capture a lot of businesses," said Shaw, who added that reform was badly needed.

In California, 6.8 million people are uninsured, while 17 million people rely on their employers for coverage, according to a Kaiser Family Foundation analysis of the census.

There is a fear that thin profit margins will be wiped out by the mandate and force some out of business, according to Paul Keckley, head of the Deloitte Center for Health Solutions, a private research think tank in Washington, D.C.

"Four percent is not inconsequential," Keckley said. Other employers will get around the law by outsourcing labor and hiring contractors.

Small firms have had to shoulder faster rising health care costs than big businesses, according to a recent survey by the Kaiser Family Foundation. Companies with between three and 199 workers saw their premiums jump 8.8 percent in 2006, while companies with 200 or more employees paid 7 percent more.

Since 2000, the overall cost of health insurance has soared 87 percent.

"The burden of a fragmented system of coverage falls heaviest on the small employer and their workers," said Mary Pittman, president of the Health Research and Educational Trust, which partnered with Kaiser on the survey.

There is another solution that small businesses would support, according to Roberto Barragan, president of the Valley Economic Development Center.

"They (legislators) need to recognize that the only way it makes sense for business to support a health care plan is if you tie it to workers' compensation reform," he said. "Otherwise the business community is going to oppose it strongly."

Schwarzenegger's plan will inevitably change as it goes through the Legislature, but small-business owners are already discussing how they will shoulder the cost.

Murray Wishengrad, owner of The Stand Restaurant in Encino, already pays part of his employees' health insurance. He wants a solution to reduce costs by linking workers' compensation and health care.

"We're double paying premiums for when they're hurt at work and when they're hurt playing soccer," Wishengrad said. "Why double dip?"

Julianna Szegedi can barely afford her own health coverage, let alone hire someone to help her run Discount Framing on Ventura Boulevard in Woodland Hills. She welcomed Schwarzenegger's plan, saying it was the government's "job" to provide health care for everyone.

But Szegedi, 60, is worried she will not be able to keep her own coverage for much longer. She pays $900 every other month for coverage with a $500 deductible.

"I have a hard time (paying) for myself," Szegedi said beneath a wall covered in partial frames. "But I'm 60. I need to keep it in case I have to go into the hospital."

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