WSJ on Rising Health Costs for Small Biz

The Journal is good today in writing on how higher health-care costs, exacerbated by the financial crisis, are hitting small businesses.

The paper nicely explains why premiums are rising sharply and illustrates the impact well. This paragraph neatly sums up, in an anecdote about one small firm, a lot of what’s wrong in our health-care system.

After no increase last year, E.CAB’s premiums jumped 75% to about $6,800 a month when its annual Blue Cross Blue Shield of Florida policy came up for renewal this month. Much of the jump was triggered by the hiring of a few older workers by the 25-employee firm, pushing it into a higher-cost actuarial bracket. E.CAB couldn’t get a better price from rival insurers.

The market is telling businesses to hire fresh-faced youngsters and leave older applicants out. If you think this doesn’t have a broadly negative effect on the job market for middle-aged folks, you’re crazy. One market is distorting another.

And it has an effect on the broader economy. The extra money spent by E.CAB can’t go back into the business:

Rather than pass the cost on to his employees, who aren’t required to contribute premiums for themselves though they do for family members, Mr. Lance said he’s forgoing new wood-cutting equipment he had planned to purchase.

And Mr. Lance’s employees are the lucky ones.

Has America ever needed a media watchdog more than now? Help us by joining CJR today.

Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at Follow him on Twitter at @ryanchittum.