Wednesday, June 30, 2010

Support the Small Business Jobs Act

Scott Hauge's Small Business California blog posts the press release for Sen. Mary Landrieu and Sen. Max Baucus' recently released Small Business Jobs Act. I encourage you give voice to your comments and support by contacting Caroline Bruckner in Sen. Landrieu's office.

Wednesday, June 23, 2010

When are we going to contain health care costs?

Like most small business owners, I'd like to take care of my employees as best as I am able. In part, that means providing reasonable health care coverage. Unfortunately, reasonable is not often used in conjunction with health care and small business. Like in so many other areas, small businesses are squeezed by unreasonable forces. Why is it that the cost of insurance for an employee at a firm with a handful of employees is 2-3 times what that same employee's cost would be at a firm with 5000 employees?

It's the same individual, with the same risk factors, and the same dispositions and predelictions. No more no less than if they were employed at a larger firm. But for some reason, health insurance companies are allowed to charge substantial more of small businesses than is reasonable. It would be like offering a discount card at the coffee shop only to employees of companies of a certain size, and charging a premium to anyone from a smaller firm.

Many of you can't even begin to imagine how expensive it is for a small company like mine (six, soon-to-be-seven, employees) to provide coverage for our workers, which I would relinquish only under severe duress, because I'd like to treat them at least as well as I would like to be treated.

To give you a sense of it: current total premiums for my employees account for 26.6% over payroll. The company covers most of employee's premiums and a lesser portion of their dependents'. In real terms, that means on average for every $100 an employee earns, the insurance company receives $26.60, of which the company pays $15.35. Put another way, health insurance costs the company about twice as much as payroll taxes. Yes, I believe everyone deserves coverage. But unless we contain costs, this is as unsustainable as the housing bubble was.

When will the bickerers in Washington get it?: we don't care what party you're from, whether you're an incumbent or an outsider, what labels you assign to others or they assign to you. We care about you getting the job done. CONTAIN HEALTH CARE COSTS so we can get on with doing what small businesses do best: innovating and creating jobs!

$1m, 3.5 years, 7 jobs

The SBTC is looking to make the case in support of investment in small R&D businesses as a means for driving innovation and creating high-quality sustainable jobs. Here's the rundown on my firm:

  • April 2008: Unemployed PhD attends SBDC seminar on starting a Technology Business; First knowledge of SBIR.
  • May 2008: Company founded.
  • June 2008: First SBIR proposal submitted.
  • August 2008: DoD SBIR Phase I awarded ($80k).
  • June 2009: DoD Phase I Option exercised ($70k); part-time assistant hired.
  • October 2009: Moved to larger office; second part-time employee hired (Master's degree).
  • February 2010: Second DoD SBIR Phase I award ($70k).
  • March 2010: DoD SBIR Phase II awarded ($750k); two full-time researchers hired (one PhD).
  • May 2010: third part-time employee hired.
  • [August 2010]: anticipated start date for fourth full-time employee (PhD).

Summary: Government R&D contracts awarded to one start-up firm in the amount of $970,000 has translated to the creation of 7 jobs (three PhDs, one Master's). Do the math*: that's less than $40,000 of government investment per job per year of the contracts, or less than $57,500 per FTE!

* $970,000/3.5 years/7 jobs; $970,000/3.5 years/4.825 FTE.