Employee Health Insurance

In an article entitled "Health Insurance Costs Soar for Small Businesses", in the Kansas City Star, author Julius A. Karash discusses the growing problem of providing this important benefit for employees.  While it’s a problem that touches businesses of all sizes, it’s a bigger problem for the independent business because rates for smaller businesses tend to be higher.   Employers with smaller numbers of employees lack the bargaining power
of larger companies.  To make matters worse, insurers consider smaller
employers a greater risk, causing rates to be higher.  If just one employee of a small company develops a serious health problem, rates can go through the roof.

According to the Kaiser Family Foundation, the average premium for employer-sponsored health coverage rose 9.2 percent from 2004 to 2005 compared to an overall inflation rate of 3.5%. The 9.2 percent figure was for all employers. 

A recent article on CNNMoney.com reported that almost all employers with more than 100 employees (94.3%) offer health insurance; only 34% of companies with fewer than 10 employees offer coverage.  According to one payroll provider for small businesses, 11% of small companies currently offering health benefits may drop them next year.  For companies employing from three to 199 workers, the number offering health coverage is 59%.  The US Chamber of Commerce reports that almost 6 in 10 Americans who lack health insurance are employed by small firms.

So, is there any relief in sight?  The answer is a definite maybe.  Some insurers are offering creative solutions which combine employers in a single group, creating greater buying power and spreading the risk over a larger number of people.

The health savings account, which works on the same principle as an IRA, is becoming more popular.  With an HSA, the employee has money deducted from their paycheck before taxes.  It’s put into an account and can be used to pay medical expenses.  The plan works best for people who know how save and who have predictable, but not major, medical expenses. 

The government has been looking at this issue for quite a while, but hasn’t been able to come up with a solution.  So-called small business health plans or association health plans would pool independent business coverage, resulting in lower costs.  These national plans have been opposed by state insurance departments who would have no oversight over them.  Federal legislation has been passed several times by the House, but the Senate hasn’t gone along.  A current proposal by Sen. Mike Enzi (R, WY) may have a chance.  It retains state control over the program.  Sen. Enzi claims that his proposal would actually reduce small business insurance costs by about $1,000 per employee.

With small businesses (less than 500 employees) making up more than 99% of all employers, this isn’t a problem that’s going to go away.

Question:  Do you offer health insurance to your employees?  Please take a moment to answer the poll question on the left.  Results will be tabulated only as a percentage of votes only.  Your answer is anonymous.

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