Why Small Companies Have No Health Plans
June 6, 2009 by Jean Murray
Filed under Business
Health care reform is the hot topic on “The Hill” these days. Most of the discussion focuses on individual health care, and big businesses have health care plans, but what about small businesses? Will they be treated like individuals? Or like big businesses?
A recent NYTimes article discusses the question many are asking: How will small businesses be affected by health care reform? I did some research a while back for a blog post on health insurance for small businesses, and I got a ton of responses from insurance companies, so I have been asking questions. I found out why most small businesses don’t have health care for employees – it’s too expensive because of the state insurance regulations and insurance ratings.
Why Small Business Health Insurance Costs So Much. If I wanted to set up a health plan for the employees in my small business, I would have to comply with state law and (1) offer coverage to all employees and (2) pay at least 50% of the premium cost for each employee. If fewer than 50% of my employees elected not to have coverage, I could not continue the plan. In addition, since insurance costs are determined by experience (claims), the cost of my company’s plan would be calculated by the age and health of the employees. in a small employee group, one person with a chronic health condition could make the rates unaffordable for everyone in the group.
Making Small Business Health Plans More Affordable. The only way a small business can afford health care for employees is to gather into a larger group to share the costs and even out the experience. Sure, each employer in the group will be paying a little more, to cover the high-risk employees, but the overall cost is usually lower.
A Proposal for the Health Care Reformers. Insurance companies, it seems, are not interested in helping solve the problem because they are making money on these small plans. If the government wants small businesses to provide health care for employees, it will have to come up with tax credits large enough to offset most of the costs of these plans.
Sure, small businesses want their employees to have health care. But we aren’t in the business of providing health care; we are in the business of making money so we can keep paying our employees. If the lawmakers want small businesses to get on board, they need to provide support.
