Health Insurance Articles

Small Business Costs May Be Reduced By Health Insurance Reform

2009-11-06

Small businesses may have a lot to gain from health insurance reform, as a new report by Health and Human Services (HHS) Secretary Kathleen Sebelius demonstrates. The report outlines numerous benefits for small businesses that would arise by revamping our current health care system. It also serves to highlight some of the health care pitfalls that currently plague small businesses. "The high cost of care is making it difficult or impossible for these [small] businesses to offer care or grow their business," said Sebelius. "Health insurance reform will bring costs down and give small businesses the relief they need."

Current proposed health insurance reform plans seek to bring down health care costs for small businesses in numerous ways. First, reform would look to provide tax credits to small businesses to help with what many see as a "hidden tax" that already exists for small businesses. Reform would also put an end to what Sebelius described as "arbitrary premium hikes," increasing cost stability for smaller business policyholders. Regulations currently being considered would also limit out-of-pocket spending and eliminate caps on benefits, so that employees of small businesses who already have health insurance would have more coverage.

Currently, small businesses pay up to 18 percent more than their big business counterparts for similar health insurance coverage. That disparity is due mainly to broker fees and administrative costs, which make up a much higher percentage of total health care costs for smaller businesses. High broker fees often account for up to 10 percent of premiums. In addition, small businesses have three times the administrative costs that the large group market has. These higher costs are proving to be a huge obstacle for many small business owners. It is reported that nearly 75 percent of small businesses that don't offer benefits naming high premiums as the reason.

Even when small businesses are able to offer their employees health care coverage, they aren't able to offer the same level of health insurance that employees at larger companies receive. Smaller businesses are forced to pass the high costs of health insurance on to their employees, who, according to Sebelius's report, are much more likely than large firm employees to have to shoulder the burden of high health care costs. The report concludes that "36 percent [of small business employees] spent more than 10 percent of their household income on out-of-pocket medical expenses in 2007, compared with 27 percent of workers in larger firms."

Small businesses are a driving force in our economy, and these disparities are preventing much needed growth. Health insurance reform would curb the costs for small businesses and help get small businesses back on track.