March 29, 2024

You’re the Boss Blog: For Small Business, Bad News on Health Care Costs Isn’t as Bad

The Agenda

How small-business issues are shaping politics and policy.

There’s bad news from the workplace: as The New York Times reported on Tuesday, the cost of health insurance rose sharply in 2011 after several years of relatively slow growth. According to the Kaiser Family Foundation’s annual survey on employer health benefits, the average premium to insure a family of four grew 9 percent, to just over $15,073. For single coverage, premiums rose 8 percent, to $5,429.

But for small firms, those with fewer than 200 employees, the news was not quite so dire. Yes, the cost of coverage grew more sharply than in 2010, but the increase was lower than that for large companies, or overall. Average premiums rose only 6 percent for family plans, to $14,098. For single coverage, the average cost at small companies was $5,326, again up about 6 percent.

It may seem counter-intuitive that smaller companies have lower premiums than large companies, which presumably have more buying power and lower administrative costs. But the Kaiser research suggests a couple of explanations that will resonate with small-business owners. First, high-deductible health plans, which are cheaper than plans with lower deductibles, claim nearly a quarter of the small-group market, a larger share than at big companies. And small-group plans are less generous than plans at big companies. One striking difference is the size of the deductible the worker must pay before insurance kicks in. At large companies, the average deductible for so-called “preferred provider organization” plans (the most common type of plan at both big and small companies) is $505. At small companies, it is $1,202.

So far, small employers have resisted passing on too much of the increase to their workers. The share of premiums paid by the employer has held fairly constant over the last decade — in 2011, small companies paid, on average, 85 percent of the premium for single coverage and 64 percent for family plans. That’s a higher share than big companies pay for single plans, but a much lower share for family plans.

Kaiser researchers have also found over the last decade that small companies offering coverage are much more likely to shoulder the entire premium cost than large companies — perhaps surprising, given that the burden health care costs place on small businesses in particular is a staple of the health-care reform discourse. Thirty-five percent of small-company workers with single-person plans pay no premium at all. But that number has fallen steadily since 2002, when it was 45 percent. (The comparable figure for employees with family coverage is 14 percent, compared with 18 percent in 2002.)

And fewer small companies even offer health insurance these days. The drop is steepest among the smallest businesses, those with fewer than 10 workers. After a spike in offerings last year that surprised Kaiser researchers, the share of companies that offer health insurance fell to just 48 percent, better than in some recent years but down from 58 percent in 2002. At the same time, the number of employees eligible for insurance who actually accept the offer has fallen, too. Only 78 percent of small-business employees who were offered coverage took it in 2011.

Article source: http://feeds.nytimes.com/click.phdo?i=56e7b1cc47674f739d7170f87ee5319f