In September, the U.S. Census Bureau released the latest numbers on health insurance coverage, and the situation for workers – and small businesses – is bleak.
According to the Census report, not only did the percentage of people without health insurance coverage increase but the percentage of people covered by employment-based health insurance decreased last year, from 59.8 percent in 2005 to 59.5 percent.
For the Hispanic population, the news gets worse: The U.S. Current Population Survey (2001-2005) shows that in 2004, 65.7 percent of Anglos had employer-provided coverage, compared to 49.9 percent of African Americans, and just 41.1 percent of Hispanics.
"More workers and their families are losing employer-sponsored health insurance," says Sara Collins, assistant vice-president of the Commonwealth Fund, a nonpartisan foundation that studies the U.S. health care industry. "Most of the increase in the number of uninsured Americans was due to a decline in workplace coverage. Although the individual market is a last resort for those shut out of employer-sponsored coverage, it is by no means a safe or secure haven for everyone."
One obvious reason for this is the skyrocketing costs of health care. According to the Kaiser Family Foundation, health insurance premiums rose 9.2 percent in 2005 and have increased about a 70 percent over the last five years.
These annual increases hurt small businesses even more. A study by the Commonwealth Fund finds employees in smaller firms pay, on average, 18 percent more in health insurance premiums for the same benefits than do employees in the largest firms. The report cited "the inefficiencies of the small-employer market: a result of the higher administrative costs from marketing, medical underwriting, greater risk, and other factors associated with small size."
For entrepreneurs and small-business owners trying to stay afloat, health insurance is often a first thing on the chopping block when budget cuts are necessary. So, while many may want to offer benefits, options are limited.
"Most small employers offer sound business reasons for offering health benefits to workers: it helps with employee recruitment and retention, and increases productivity. More than three-quarters report that offering health benefits is 'the right thing to do,'" according to a study by the Employee Benefits Research Institute.
But the costs get in the way.
The Kaiser report found that many small firms are choosing to drop coverage or pass on costs to their employees.
Additionally, a July 2006 SurePayroll survey of small-business owners revealed that nearly 11 percent of respondents who offer health care benefits say they may not do so in 2007, depending on costs. Of those that don't offer a plan now, 44 percent have no intention of offering benefits in the coming year.
"If you think that we have health insurance issues now, imagine if 350,000 small businesses stopped offering health insurance in 2007," SurePayroll President Michael Alter said in a statement. "The alarm on small-business health care has been sounding for quite a while, and legislators keep hitting the snooze button."
Many small businesses and their advocates have been looking for some sort of legislation to help companies find affordable solutions.
Rep. Nydia Velazquez, D-New York, ranking member on the House Small Business Committee, and a number of her colleagues on the committee have been working on initiatives that would enable small businesses to use their buying power to purchase affordable health care, says her spokeswoman Kate Davis (see Legislative Update).
