Part 3: Little choice — Small companies struggle to provide health benefits

Editor's note: This is the third of a five-part series.

When it's time to look at his company's health-insurance benefit for the coming year, Matt Klein gets a giant knot in his stomach. The economy has rocked Klein's Custom Countertops, a family business in Salt Lake City. But the cost of providing health-care benefits for the company's 25 employees has continued to climb. Last year, the company's health-insurance premiums rose 25 percent.

It's a painful scene played out across the state by owners of small businesses — and 95 percent of employers are small businesses in Utah. They lack the buying power of bigger companies to get affordable health insurance. Many of them simply do not offer insurance to employees at all, according to a number of studies, while others see coverage shrink year after year. That's particularly painful in Utah, where close to half the work force is self-employed or works for a small business, if you define that as having fewer than 50 workers. Under the federal definition, which is fewer than 500 employees, 97 percent of the Utah work force labors for small business, says the U.S. Small Business Administration.

"It's one of the hardest things we do," Klein says of looking each year at the options and making sometimes-painful decisions, which have to be explained to employees who are also friends.

Five years ago, the company could pay 75 percent of the cost for employee health-care coverage. But as prices rose, it was forced to a 60/40 plan. They're now splitting it 50/50.

But if misery loves company, Klein can take some solace in the fact that his company's situation is far from unique.

"We're hearing from small businesses that they are quite literally bleeding," said Cheryl Smith, strategic-plan-development manager in the Governor's Office of Economic Development. "In the traditional market, the choice they have is to keep full coverage or completely drop coverage. Some may scale back their work force or cut salaries. They cannot remain afloat in the situation they are in, and there's no way of predicting what their costs will be next year."

And Utah's lucky, said David Jackson, president of First West Benefits Solution. Health-care costs are lowest here, according to at least one recent study. "If we're struggling, can you imagine what the rest of the country is doing?"