Health insurance: The big bump in the road to entrepreneurship


Limited access to health insurance and its daunting cost are discouraging Minnesotans from starting or expanding businesses and standing in the way of small towns seeking revitalization through entrepreneurship.

The dual problems of finding and paying for health plans to cover business owners’ families and a small number of employees keep some prospective entrepreneurs from going into business, according to business development watchers in rural Minnesota.

These problems have become more acute in the past five years since the Minnesota Department of Health documented the adverse impact of the employer-based U.S. health insurance system on small business owners.

“It keeps getting worse,” said Tara Mueller at the Madelia Area Chamber of Commerce in southern Minnesota.
Bird Island business owner Mark Glesener said some people walk away from starting a business just because success would require hiring people who would need ever more expensive fringe benefits.

Glesener operates a retirement and assisted living housing company that, with 30 employees, is one of the largest employers in Bird Island. A rural-based company must generate significant and predictable revenue just to consider offering health insurance for employees, he said.

Such problems aren’t new, nor are they unique to rural communities. They do, however, pose special problems for small towns in Minnesota that want to arrest population declines and slumping economies by encouraging startup businesses.

Small and startup companies often do not have the money to contribute to employee health plans, said Madelia’s Mueller.

“And if they don’t have health benefits, they’ve got problems getting and keeping employees,” she said.

The Minnesota Legislature as well as business and research groups have looked at ways to make health insurance more accessible and affordable. But these efforts to find a state remedy for a national problem haven’t yielded relief. Gov. Tim Pawlenty has resisted attempts to allow small businesses to buy into the state’s MinnesotaCare insurance pool, even at full market premium rates.

Specific problems were identified in the state Health Department study five years ago, said Mary Ann Casey of Krueger & Associates, the St. Paul-based research and consulting firm that prepared it. While it contributed to discussions among policy makers and business groups, she said it hasn’t produced remedies or consensus on what Minnesota might do.

Some of the study’s conclusions apply particularly to rural communities where everyone knows each other well.

“In fact, often their employees are relatives and friends,” the survey of business owners noted. “Most owners would like to supply insurance, but taking on insurance means taking on additional responsibilities. Many are already working long hours and some say they are marginally profitable now.”

Among other conclusions, the study noted that business owners are interested in government programs that might make it easier for small businesses to offer insurance, although some owners feared that could lead to higher taxes. The business owners also wished they knew why health care costs and insurance premiums are rising faster than inflation.

Glesener, who serves on community and regional civic organizations that promote economic development, said the rising costs have forced some companies to scale back insurance benefits by increasing employee premiums and deductibles.

This is hard for people living paycheck to paycheck, and that includes a lot of people in rural communities, Glesener said.

In some two-income households in west-central Minnesota, one person works a job almost exclusively to secure health benefits for the household, he added. “They are lucky to take home $100 a paycheck after insurance contributions,” he said.

Without government action, access to health coverage will only get worse, Glesener said. Small businesses won’t offer insurance benefits to employees if they can’t control costs, he said. And some prospective entrepreneurs won’t even start a business, not knowing what costs will arise later.

“When you think about it, why give up a job and go start a business if you have insurance for your family now?” Glesener said. “Instead of taking a risk, you’d probably stay where you are.”

Strengthening small business and encouraging entrepreneurship in rural Minnesota should be a key priority for our state. But until health care is affordable and accessible, Minnesota’s potential entrepreneurs won’t have a true opportunity to succeed.

The full 2002 report is available on the Minnesota 2020 website.