Small Business Owners Think Health Reform Would Make Matters Worse

An overwhelming majority of small business owners say they do not offer health insurance to their employees, and most believe they will be hurt financially by healthcare reform, according to a survey released today by Discover Small Business Watch.

Still, the small business owners expressed higher economic hopes in January, largely because of increased expectations that conditions for their own businesses would improve in the next six months. The Discover Small Business Watch is a monthly survey of 750 small business owners, each with less than five employees.

"Healthcare continues to be a concern for most small business owners as they try to balance cost with other business obligations," says Ryan Scully, director of Discover's business credit card. "In terms of relief from the pending health insurance reform legislation, they aren't holding their collective breath for anything to change soon."

While a majority of small business owners rated the economy as "poor," and many believed their own business conditions will worsen, more small business owners are planning to increase business development spending over the next six months, according to the survey.

"January showed us the first month-to-month increase since August in the number of small business owners who plan to increase spending on business development," Scully said. The survey revealed that 24% would spend more on advertising, inventories, and capital expenditures—an increase of 18 % from December.

"Self-investment is a healthy sign in the small business economy," he says.

Among the findings in the January survey of small business owners:

• 81 % of small business owners say they do not offer health insurance to their employees—a decrease from 85 % in January 2009.  That still represents an increase above the 77% in January 2008 and 74% in January 2007. Among others that offer health insurance, 29% considered discontinuing it because of cost. In addition, 21 % of owners are uninsured; down from 25% in January 2009. Of those who are insured, 34% of owners receive their coverage from another family member's plan.


• 58% say health reform will result in a worse health insurance situation. 23% believe their situation will improve, while 15% see "no impact" and 4% aren't sure.


• 58% rate the economy as poor, while 8% rate the economy as good or excellent—up from 4% in December.


• 31% believe the economy is getting better, which is up from 25% last month.


• 49% believe their own business conditions will get worse; 29%  believe their own business conditions will improve over the next six months, which is an improvement from 22% in December and 19% in November 2009. On the other hand, 23% expect things to stay the same, while 4 % aren't sure.


• 46% believe the economy is getting worse—down from 49 % in December; another 18% "see the economy staying the same; 4% aren't sure.


• 51% of small business owners experienced cash flow issues in the past 90 days, which was unchanged from December; 46% have not experienced cash flow issues; 3% aren't sure.