From the March 2004 issue of Entrepreneur

Entrepreneurs agree that the rising cost of health insurance is one of the biggest problems they face. According to a study by research firm Mercer Human Resource Consulting LLC, the average health-plan cost per employee rose by more than 10 percent in 2003. Costs have risen so much that some entrepreneurs are not insuring themselves or their workers.

But while everyone agrees that health insurance costs are skyrocketing, there is little agreement about the best ways to make health care more affordable for small employers. Rep. Nydia Velazquez and Rep. Rick Renzi see drastically different solutions to the health-care crisis. Velazquez, a Democrat representing New York's 12th District, is the ranking minority member on the House Small Business Committee; Renzi, a Republican representing Arizona's 1st District, founded three small businesses before entering Congress.

What one change would most help small companies facing high health insurance costs?

Rep. Nydia Velazquez: There's not one solution. In the House, we passed the Association Health Care Plan [a congressional initiative to let small employers pool and buy insurance], but the president didn't back it. If we enacted the Association Health Care Plan, we could help working families. We still have 44 million uninsured, and many are owners [or employees] of small businesses. A 100 percent deduction for health insurance for the self-employed would help, too.

Rep. Rick Renzi: I ran on [advocating] association health-plan legislation. Small businesses have to have the ability to pool together and expand their buying power. They should be able to pool for cost savings and better coverage-which is what the big companies get. The legislation hasn't been completed because of concerns on the Senate side, where they're able to filibuster.

Much of Washington is now talking about the recently passed Medicare reform bill, which begins to open Medicare provisions up to the private sector. Is this part of the answer to high health-care costs?

Renzi: Overall, the new Medicare bill will reduce health-care costs because it will modernize the system and reduce inefficiencies in the health-care codes. Health-care providers will gain higher reimbursements, [creating] a true incentive for them to provide better coverage.

Velazquez: I disagree. It may end Medicare as we know it-it will privatize it. The legislation will [hurt] older business owners.

Renzi: When I did town hall meetings on Medicare [before the legislation passed], one of the concerns I was getting was, Would the private sector drop their drug benefits, putting small businesses in the position of having to provide drug benefits? So [with] other congresspeople, [I] helped get offsets [i.e., cost reductions] in the legislation for businesses that provide drug benefits to employees so they can keep their best employees.

In addition to legislation creating new kinds of insurance benefits, is there anything Congress could do to impact health-care regulation, which can be burdensome for small companies?

Velazquez: We definitely need to make some changes. But we need to make sure that whenever we change regulations, we assess the impact on small-business owners, not just decrease all regulation [affecting] health-care providers.

Renzi: We have to cut regulation. Right now, the insurance industry is able to point to tort reform as a reason they can't lower costs [for health insurance]. If Congress acts on tort reform, [cutting] frivolous lawsuits, then the burden will be on the insurance industry to provide prices and solutions for small business.


Joshua Kurlantzick is a writer in Washington, DC.