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Health care bites into businesses’ bottom line

General Motors' health care announcement is expected to resonate across the economy, from Fortune 500 companies to small business owners, reports NBC's Tom Costello.

General Motors’ announcement of an agreement with the United Auto Workers on health care is resonating with Fortune 500 companies and small-business owners like Jerry Kezhaya, who employs 24 people at his two auto body shops outside of Dallas.

His biggest expenditure isn't auto parts, but skyrocketing health care costs, which are up 36 percent this year alone.

“That is what affects our net profit at the end of the year,” says Kezhaya. “And if we're not profitable, chances are one of the first things that we will cut is going to be health insurance.”

He wouldn't be alone. While most large corporations still offer health insurance, others are increasingly dropping coverage. According to the Kaiser Family Foundation, 60 percent of employers offer insurance today, compared with 69 percent five years ago. And this year companies will pay an average of $8,167 per employee family for health insurance, compared with $4,248 five years ago.

Why the dramatic increase? Experts say the cost of health care correlates very closely to the growth of the 65-and-older population. Which means corporations are getting squeezed by retiree benefits.

“Rising health care costs are really sapping the lifeblood out of the economy,” explains Dr. William Brody, president of Johns Hopkins University. “And GM is really the canary in the coal mine here.”

It's a symptom of a very big corporate dilemma.

“GM's announcement is a seminal event,” says Mark Zandi of “It signals that businesses are becoming more aggressive in getting their employees to shoulder the burden of escalating health care costs.”

In fact, nearly 40 percent of American corporations plan to ask their workers to pay more in premiums next year, as health care continues to take a bite out of the bottom line.