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More Small Businesses Dropping Health Plans

By CityTownInfo.com Staff

May 28, 2009

The rising cost of health insurance along with the economic downturn has forced many small businesses to choose between cutting healthcare benefits or eliminating jobs.

The Wall Street Journal reports that according to the Kaiser Family Foundation, health insurance premiums for single workers rose 74 percent for small businesses from 2001 to 2008. As a result, 10 percent of small businesses are now contemplating canceling healthcare coverage, according to a recent survey by the National Small Business Association. Similarly, a Hewitt Associates survey determined that 19 percent of all companies expect to stop providing healthcare benefits within three to five years.

DailyFinance.com points out that those left without employee-sponsored health plans have little choice but to purchase individual insurance. Yet those with pre-existing conditions may not qualify, and those who enroll pay expensive premiums: The average cost for a family on a private health insurance plan can be more than $20,000 annually.

"In today's environment, health insurance is extremely costly and to shift that burden to individual employees when raises and bonuses are trimmed really makes it a double whammy," said Dennis J. Ceru, professor of entrepreneurship at the Babson College Graduate School of Business, who was quoted in The Journal.

Employers are struggling with the decision to eliminate health plans, but many feel they have no alternative. "I have a terrible time handling that I can't give them than coverage," said Sheryl Weldon, owner of Commerce Welding & Manufacturing Company, which recently stopped providing health insurance to its employees after health costs skyrocketed and company profits dipped. "How do you expect someone to be at their job every day and perform if they can't be healthy?"

Scott Krienke, senior vice president of product lines at Assurant Health, noted that health insurance premiums typically increase 8 to 16 percent annually for small businesses. The smallest firms are particularly at risk for significant increases in rates.

In a related article, The Bristol Press in Connecticut reports about a health plan that could very likely help small businesses: The Connecticut Healthcare Partnership, which would allow municipalities, small businesses and non-profits to join a self-insured state employee health plan. The program would ultimately translate into significant savings for towns and small businesses.

While 24 other states allow municipal employees to join the state employees' pool, Connecticut would be the first to allow non-profit organizations and small businesses with less than 50 employees to join.

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