Health costs are small businesses' No. 1 problem

By Jane Sarasohn-Kahn

The cost of health insurance is the No. 1 problem cited by small business owners. Health costs beat gas prices -- the No. 2 most severe problem cited by small business, in a March 2008 survey.

This week, small business leaders convened at the annual National Small Business Summit conference of the National Federation of Independent Business (NFIB).

The report notes the downturn in the economy during the second half of 2007 when the NFIB Small Business Optimism Index dropped to 94.6 in December, the lowest since 2001.

Health care costs rank first in small business problems regardless of the legal form of business (including proprietorships, partnerships, C-Corps, S-Corps, or LLCs).

This NFIB's survey of small business reveals the major concerns of small business owners. Small Business Problems & Priorities was released this week,following up similar surveys from 1982, 1986, 1991, 1996, 2000 and 2004. Having these historical data for comparison is useful and instructive.

Click on the chart on the right to see how the top 8 problems of small business rank since 1982. The takeaway is easy to see: health care costs have been the top small business problem since 1982, when this survey was first conducted.

Jane's Hot Points: Small business has felt over a quarter-century of hurt when it comes to health care costs, and this is shown to be true for the smallest-small companies (with 1-4 employees) to larger (with over 100 employees). Health costs are also the top problem for small business across industries, from agriculture and retail to wholesale and construction. The NFIB survey doesn't call for specific remedies. But it does call out for change, and soon. A silver anniversary on health cost-problems is nothing to celebrate.