Among the many challenges of running a small business, health insurance looms large. Small businesses, which provide jobs for tens of millions of Americans and play a strong role in the U.S. economy, pay more than large companies for the same coverage and have fewer options. Moreover, insurance premiums have consistently grown faster than inflation or workers earnings. Between 2002 and 2007, the cumulative growth coverage was 78 percent compared with cumulative wage growth of 19 percent, according to the California-based Kaiser Family Foundation.
Small business owners and employees and their families make up the single largest segment of the uninsured population in the United States: about 27 million people out of a total of 47 million uninsured Americans, according to the National Federation of Independent Business (NFIB), an advocacy organization. Given that minority and women-owned small businesses are now the fastest growing business segment, that means many Hispanic business owners and their employees and families are without coverage.
Although health insurance is a huge expense, experts and entrepreneurs say it can give small businesses a competitive edge.
"It's almost necessary if you want to have good employees," says Cervantes "Buddy" Roybal, who owns Coronado Paint & Decorating in Santa Fe, New Mexico and employs 25 people. He offers to pay for half of a family insurance plan for his employees and says about 60 percent have signed up.
According to surveys by the Employee Benefit Research Institute, most small business owners who offer coverage believe it's good for business. Most of those who don't, on the other hand, think it doesn't matter. "It depends on the business," says Paul Fronstin, director of the institute's Health Research and Education Program. "Some small businesses probably need to be competitive in the labor market," he says.
Unfortunately, "in the small group market," says Michelle Dimarob, manager of legislative affairs for the NFIB, "you really are held captive to just a couple of plans, in many cases just one carrier, you tend to pay more for administrative costs, and you tend not to be able to pool risk as effectively."
Small group insurance is primarily overseen at the state level, and rules and requirements vary across the country. That prevents small businesses from joining together across state lines and forming insurance pools that could gain them more purchasing power. Some states, including New York, Ohio, and Texas, do allow small companies to band together within the state to form group purchasing arrangements. Mr. Fronstin says such groups don't substantially lower the cost of insurance, but they do give employees more choice because groups can offer more health plans than a single business could. Massachusetts, Maine, Montana, and other states offer subsidies to make health insurance more affordable.
Small business owners who want to offer health insurance "need to be taking steps to get educated, so they can ask their agent and broker very pointed questions," Ms. Dimarob says. She recommends ehealthinsurance.com and revolutionhealth.com, and the book Insurance for Dummies. State insurance departments and the National Association of Insurance Commissioners are also valuable resources.
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