Since 2001, small-business owners have seen a double digit increase in their health insurance premiums and many are looking at ways to bear the increased costs, including scaling back coverage, increasing workers' contributions, and increasing co-payments and deductibles.
The National Federation of Independent Business found that 65.6 percent of small-business owners think health insurance costs are a "critical" issue. While Fortune 500 companies have the advantage of negotiating power and tax advantages, small businesses are bearing the greatest burden of the increasing costs. The smaller the business is, the more its costs increase. The Kaiser Family Foundation and Health Research and Educational Trust found that health care premiums for businesses with fewer than 200 workers rose 15.5 percent last year, compared with 13.2 percent for larger companies. Small-business owners spend an average of $3,432 on insurance for each employee, compared with $3,360 for bigger companies.
The Kaiser report found that 95 percent of businesses with 50 to 199 workers offered insurance last year, while 85 percent with 25 to 49 employees did and 76 percent with 10 to 24 employees did. The number drops to 55 percent among companies employing only 3 to 9 workers. Small businesses with fewer than 200 employees that offer insurance declined to 65 percent last year from 68 percent in 2001, showing a trend towards dropping the practice.
The increasing number of Americans without health insurance has become an issue in the Presidential campaign, with President Bush proposing an expansion in the use of health savings accounts. These accounts allow employees to contribute to a tax-free fund that they can use for all medical expenses, and provide one method to help employees deal with these rising costs. Senator Kerry has proposed allowing everyone to buy into the same plan that Congress has, and giving tax credits to companies that employ low to middle income workers.
Other options to help employers reduce costs include joining cooperatives and using their larger size to negotiate more affordable rates.