New tariffs and threats to annex Canada were the concerns small businesses at the last Mackinac Policy Conference. This year, those concerns persist, plus you can tack on the high cost of gas.

However, CEO of the Small Business Association of Michigan, Brian Calley, says the rising cost of employee healthcare is the looming giant for employers. He spoke to WDET about the issues surrounding small businesses and his views on how to support them.  

The following interview has been edited for length and clarity

McNamara: Last year when we talked, we were absorbing a fight with Canada and tariffs. This year it’s high oil prices, high gas prices. How are small businesses doing after one year of uncertainty? 

Calley: Uncertainty is always hard for small businesses to fight through, but I would add something to that list, which I think even eclipses the collective impact, and that is the rising cost of health care. If you’re to talk to a person who has employees and provides benefits to those employees, which is most small businesses, they are buckling under this year over year over year increased costs. We just did a survey with our members to ask, what does that mean, where are they at? They tell us it’s hindering their ability to grow and to add to their team. They put all their capital growth and their margin toward paying next year’s increases. The increase is on the order of what it would cost to bring on a new employee or two, and so that’s huge. But then now we’re finding 42% of our members in our last survey said that at the current rates they’re one to three years away from being able to offer it at all, and that’s a massive, massive change, and so we’re trying to raise the alarm on this. This is the most talked about thing by small business owners, at least those with employees that gets very little attention or discussion out there in the landscape. These other issues are difficult to deal with, but this one is widespread across this across the board. 

McNamara: Two questions: What can the state do, and what do you need from the federal level? 

Calley: At the state level, which seems to be the more realistic place to make something happen, at least at the moment. Couple of things: when insurance companies file for their rate increases, you can look under the hood, you can see exactly what’s driving the cost, and we know it’s utilization and the cost per service, so we need to look upstream from there. What is driving that? We need to be able to look under the hood of upstream costs, and we’ve seen definitely more consolidation among the health systems, where you have a handful of huge conglomerates that control most of the health care system, and vertical integration, so from your local doctor all the way through to very complex surgical cases, it’s all controlled by a very small number of entities, and with that consolidation, you’ve seen costs rise a lot faster than regular inflation, and so that’s something that we really need to get a handle on.

A lot of states have transparency rules, so they can make the appropriate adjustments and policy to deal with these cost increases. We need something like that here. The other thing that could be changed is to allow small businesses of multiple industries to band together to create their own insurance risk pools, like a big company does. So, if you have a large company, they might use an insurance company to manage their claims, but their employee base is their own risk pool. Small businesses are too small to do that. And so the law could be changed to allow unrelated businesses to pool together, and at least at that point they could have more control over plan design and cost containment and wellness initiatives and negotiation power with networks. This would be an important change that we’re hoping the state will consider. 

McNamara: Will Matt Hall listen? Will Governor Whitmer listen? Are you already planting the seeds for this with the current gubernatorial candidates? 

Calley: We’ve been talking to all the leadership about these issues, and there are things that are happening. We know that on the transparency side, Speaker Hall has indicated and talked a lot about moving forward with something in this arena. With the Senate Democrats, who are in control of that part of the legislature, have introduced legislation to allow that multi-industry pooling of small businesses. So, we do think that there’s good bipartisan support for this.

Small businesses is of those constituencies that, across the political spectrum, Republicans and Democrats appreciate in their community, and I think generally and genuinely want to be successful. We’re hopeful that even during these partisan times that initiatives that can help small businesses move forward and to grow and to sustain will be embraced by all of them. 

McNamara: What kind of feedback are you getting from Michigan’s congresspeople like Moolenaar, Dingle, McClain, Huizenga? What are they telling you? They listen to you. They know you. 

Calley: And I served with some of them in the state legislature, and this is an issue that I know they care deeply about, and there is legislation that same small business pooling, they call them association health plans at the state level, would be called a MEWA, or Multiple Employer Welfare Arrangement, those bodies of work enjoy support among our delegation. In fact, Congressman Walberg from Michigan has introduced legislation to do it at the federal level. It’s not a lack of will, it’s a lack of the ability of that system to move forward to make big changes in the health care arena. It just seems to be difficult to get it off the ground with the broader group, and that’s why our main focuses are at the state level, can kind of get your arms around that, and you can visit the capital, and all of those people represent folks in Michigan, and our delegation, they do a lot of great work, and they care a lot about small businesses, but there’s such a small fraction of the entire body that makes those decisions, and so it’s much harder to move things through that. I think if we are going to make changes that, in the short term, that impact small businesses is more likely to be at the state level. 

McNamara: Is there something else on the state level that can be done, at least in the short term to help these small businesses to deal with the transportation costs and the like? 

Calley: In terms of transportation costs specifically, it’s difficult to establish a state policy to reduce gasoline prices, for example, just because we’re talking about a global marketplace of commodities. But there is also bipartisan work that’s happening in the House and the Senate to move the Michigan Strategic Fund, which is the fund that does incentives for these big deals, to move the focus of that more to support for small businesses, and we think that that’s a smart bet. It’s one thing to try to convince somebody from someplace else to come in here and save us, but what we say is we don’t need that.

What we need is for those that are already here to do well. That’s our best bet, and people that have already made their lives here, they’ve already put their name and reputation and their mortgage of their house on the line in order to make this business go, they’re fully vested, and so their success is our best bet. Our entrepreneurship scorecard report showed yet again this year that when it comes to job growth, that the most reliable and dependable and consistent job creators are small and medium-sized businesses, and it makes a lot of sense, because in a lot of cases, they don’t even have options to go other places. This is where they’re at, this where they’re known, where they have their contacts and their customer base, and it’s not easily transferable to someplace else. If they’re successful, our communities will be successful, workers will be successful, the state will be successful. 

McNamara: So, instead of swinging for the fences, maybe settling for some singles and some doubles. 

Calley: I think that the small business support is the home run, because it’s more of a sure bet when you put the support and the resources here, when you create an environment of success around the people that are already here, it’s gardening. When you go out hunting, you may or may not see something, you may or may not get something, but when you’re gardening, if at least if you know what you’re doing, that’s going to pay dividends over the long term.

And by the way, even the big companies all started out as small companies. When you think about the corporate names that are known all over the world from Michigan, we’re so thankful to have them. Companies that started here, like Dow or Meijer or Kellogg or Gerber or Ford, Striker. These are huge corporate names around the world, but to us here in Michigan, those are family names. In many cases, the family’s still around and involved, which is incredible.

And so, at the Small Business Association of Michigan, we think of those companies as part of our heritage. They didn’t start out big, they made it big, and they changed the world. If you support small businesses, then the next one that makes it big is going to be somewhere in that group, and you can’t predict who it’s going to be, so you might as well just make the environment of success around all of them, instead of trying to pick which one, which industry. The government’s never been successful in knowing where the economy is going to go. 

McNamara: Too slow to react.  

Calley: Yeah, that’s the thing. When things move, they do move fast, and it’s about being well positioned to support people as they grow and they innovate and they change, as opposed to trying to decide ahead of time which one is going to grow and innovate and change in a way that makes a big difference in the economy. There’s so much research and data around economic gardening. When you create the environment of success around the entrepreneur, you will have more economic success collectively.