Health of a Nation

Entrepreneurs are sick of sky-high health insurance premiums, and the government is scrambling for reform. But can Uncle Sam save the deteriorating state of health care?

Like The Who's Pete Townshend, Alex Mann, CEO of, a San Francisco applications services provider that makes products to track time sheets and expenses, could not imagine he'd ever get old.

"It's common in the high-tech business--companies never [think] about employees aging, or making any trade-offs of benefits when employees have spouses and kids," says 36-year-old Mann, who founded his company in 1995. When Mann started, "we hoped to offer a corporate package in which employees wouldn't have to contribute at all to insurance premiums."

But as costs rose--10 to 15 percent per year over the past six years--and young IT employees started getting married and having children, Mann found health care was swallowing his firm's profits, even though he has just seven employees. "We ask employees to come up with higher deductibles, we shop health insurers, but still, this year we're going to have to look at the issue of coverage again," says Mann.

Mann is hardly unique. Since 2001, health insurance premiums have risen by some 60 percent, according to the Kaiser Family Foundation. In 2004, average per-employee costs for health care rose by 7.5 percent, despite companies' efforts to transfer costs to employees by raising deductibles and co-pays. Census data shows that in 2003, 45 million Americans were uninsured, the largest number since the statistics for uninsured individuals were first compiled in 1987. Many of the uninsured work for small companies, which are less able to absorb rising health-care costs. The Kaiser Family Foundation has found that only 63 percent of small firms offer health coverage, while almost all big companies do. Worse, estimates suggest that U.S. spending on health care is likely to nearly double between now and 2013.

As a result, in the 2004 presidential race, both Senator John Kerry and President George W. Bush made health-care reform a central plank in their domestic agendas. Now, with Bush's re-election and larger Republican majorities in the House and Senate, the stage is set for some of the president's health reform ideas to pass Congress. Rick Renzi, a second-term Arizona congressman focused on small-business issues, says the GOP wins mean that, over the next two years, Congress has an opportunity to really push significant change. Entrepreneurs can't wait much longer.

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This article was originally published in the March 2005 print edition of Entrepreneur with the headline: Health of a Nation.

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