Small-business owners express frustration on health insurance.

Here's how fed up small business owners have gotten over the high cost of health care: a majority of them sampled in a new survey support a government-run, program similar to the one used in Canada.

The survey, conducted for a newly formed organization called Small Business California, found that 52 percent of the 475 respondents said they either strongly or somewhat favored a so-called single-payer system--and nearly half the respondents to 'the survey said they were registered Republicans.

"Either small-business owners believe that the system is so screwed up now that the government couldn't possibly run it any worse or the fear of government-imposed mandates on business is so great that small-business owners will support any other option," said Scott Hague, president of the organization. He is a Bay Area insurance agent who got involved in policy during the workers' comp crisis.

The evidence of frustration among small business owners is appearing as state Sen. Sheila Kuehl, D-Santa Monica, continues her long shot effort to create a single-payer system for California. Under Kuehl's proposal, a government-operated program would replace private insurance plans and offer coverage to 7 million Californians who have no health insurance.

"This finding is no surprise to me," Kuehl said. "When we talk to independent small businesses in local chambers of commerce, we see a lot of concern about the spiraling cost of healthcare and along with that an increasing receptivity to the idea of a single-payer system. Word of the efficiencies inherent in a single payer system is getting out to the business community."

While Kuehl's bill was approved earlier this month by a Senate committee, few give it much of chance of becoming law, especially with Gov. Arnold Schwarzenegger in office. (The Small Business California survey was generically worded and did not reference the Kuehl bill.)

In general, lawmakers are cautious after voters last November narrowly rejected a referendum on a previously passed law requiting employers with more than 50 employees to provide health care for their workers or pay into a state fund for the uninsured.

"Whatever is happening out there among businesses, there's no immediate government action in sight," said Glenn Melnick, a health economics professor at the University of Southern California. "For the foreseeable future, we're simply going to see employers push more and more health care costs onto consumers and employees."

And yet, health care costs have risen to the point the issue has eclipsed workers' compensation costs as the top concern of small-business owners, according to the survey.

"Am I frustrated? Absolutely!" said Madelyn Alfano, president of Van Nuys-based Maria's Italian Kitchens. Health care costs at the 10-restaurant chain have tripled over the past five years, prompting the company to phase out coverage for families of its 80 full-time employees and sign up for a low-frills health plan. "I don't see any meeting of the minds on how to really tackle this problem head-on," she said.

The frustration is not limited to small companies. Last week, General Motors Corp. reported that health care costs had jumped $800 million in the first quarter compared with the like period a year earlier, accounting for much of the $1.1 billion first quarter loss for the giant automaker.

Nationwide, health care costs for employers have risen 10 percent this year over last, according to a survey of 550 companies released last month by the National Business Group on Health. That compares with a 12 percent increase in 2004, but still marked the fifth consecutive year of double-digit jumps.

Besides increasing employee premium contributions and co-pays for medications and medical procedures, employers are increasingly looking at health savings accounts and health reimbursement accounts.

Health savings accounts are tax-free instruments that individuals can set up to pay for current healthcare expenses and save for future healthcare costs. Employers have the option to contribute to the accounts.

Health reimbursement accounts are essentially employer-funded expense accounts that employees can tap for medical expenses. They typically range between $1,000 and $2,000 per year.

Advocates of these plans say that once workers realize how much health care actually costs, they will be more judicious in seeking treatment. But shifting costs to employees can only go so far, especially if health care costs themselves keep rising.

"These rising costs are pushing us to the breaking point, and by 'us' I mean both employers and employees," said Robert Harasta, a Republican. Harasta is president of BH Tank Inc., a maker of water storage tanks with offices in L.A. and Monterey.

"The pressure is building towards a point where employees are going to end up paying all the costs. And that in turn will increase the pressure towards socialized medicine," he said.

Small-Business Worries

A survey of California's small-business owners shows concern on several
fronts.

Top Priorities

Availability and rising cost of health care    54%
Workers' compensation system                   51%
Quality of public education                    45%
Too much regulation of small business          32%
Reducing taxes                                 32%
Cost of energy                                 25%
Access to capital                              12%

Canadian-Style Health Care?

Strongly support                               23%
Somewhat support                               29%
Somewhat oppose                                12%
Strongly oppose                                30%
Don't know                                      6%

Source: Small Business California survey