Study: Most Small Firms Don't Offer Health Insurance

Healthcare costs are a perennial burden for small businesses and a new poll released today finds that 77 percent of small business owners do not offer health insurance to their employees.

Discover Business Card's survey also found that 39 percent of small business owners said the cost of health care has a major impact on their ability to grow. More than half of respondents said obtaining affordable health insurance for employees was very difficult.

Survey results also showed that:

*40 percent of employers who offer healthcare coverage have considered discontinuing it because of its high cost;

*34 percent of small business owners said employees go without health insurance;

*25 percent of small business owners said they are uninsured - an increase from 18 percent who said the same last year;

*Among small business owners who have healthcare coverage, 27 percent are insured by another family member's plan, while 35 percent have purchased coverage separately.

"Small business owners have to be flexible and resourceful to find health insurance for themselves and their families," said Sastry Rachakonda, director of Discover's business card. "But for those whose spouses don't have health benefits, or for those who can't afford to purchase a plan, they are simply going without."

Separately, Discover released its monthly "small business watch" survey today and kicked off 2008 with findings that 74 percent of small business owners feel that economic conditions are getting worse. Thirty-five percent of small business executives picked the economy as the most important issue in the presidential campaign, followed by the war in Iraq and then government ethics and corruption.

The Discover Small Business Watch is a monthly index polling small business owners who employ less than five employees and is conducted by Rasmussen Reports.

Small Business Readers: Do the numbers reported in the healthcare poll reflect your experiences in the small business world?

By Sharon McLoone |  January 28, 2008; 2:57 PM ET
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Please email us to report offensive comments.

I've been researching and writing about buying health insurance for individuals and businesses for the last year and a half. There are a number of factors that control how much small business health insurance costs that are rarely reported in the media. First, the age and health status of the employees can have a big impact on the cost. Second, business owners may be offered high feature plans, without being given the option of lower priced plans that might mean a lower cost for the agent selling the plan. Third, they may not have the time and interest in exploring all their options to truly find the best deal of low cost and decent coverage. Finally, the laws in the state that you live can have a big effect on the cost of health insurance.

Good information on this is hard to find. I couldn't find enough easily accessible information when buying for my family, and spend nearly a year compiling information into a hands-on book. My family went from a full featured $1200/month plan to one around $300/month - for a family of 5. You can learn more at my website and my blog at

Posted by: Jonathan Pletzke | January 28, 2008 9:44 PM

Small business owners are trapped by the system. There were benefits to HIPPA that addressed availability of coverage but did very little in terms of affordability. Even if the owner is willing to pay 50% of the cost of health insurance for employees, most times the healthy employees can purchase individual plans cheaper. If one employee opts to purchase the individual plan over the group plan, the group will not meet the participation requirements. Therefore, a small group cannot have a plan. If an employer has hourly employees that he cannot afford to pay for health insurance for, then no one in the company can have health insurance due to participation requirements. It means that an employer can either not provide health insurance for any employees or not be able to hire low wage earners because of the added cost of health insurance. There is no easy answer to provide health insurance if you are a small employer.

Posted by: Donna Askew | January 29, 2008 9:47 AM

No surprise! Without employer based health insurance we need to be better educated and stop thinking we are spending someone else's money when receiving health services. Discover should look at the idea for a health access card at The credit card industry may just be the catalyst to change both the pricing, cost and buying dynamic structure for the health care system.

Posted by: Steve Schuster | January 29, 2008 11:08 AM

The real culprit in this mess are the states and more specifically, the Small Group Health Reform (almost all states have similar programs effecting businesses with 1 to 49 employees)initives put in place several years ago. These state programs require insurance carriers to add coverage for just about everything. And they are required to offer guaranteed issue to all comers. The combination of ultra, extreme broad coverage, with guaranteed issue causes these programs to raise rates substantially year after year. And, it is mandatory that any small employer (between 1 and 49 employees) purchase under these rules. Further, these plans utilize community rating. All claims are pooled and spread over the entire pool. The problem with this concept is that an employer who would want to utlize a high deductible health plan will have their experience pooled with the majority of those who don't have high deductibles. This takes away any incentives offered by HDH plans.

Posted by: Ray DiDia | January 29, 2008 5:26 PM

As a small business owner I'm always looking for creative financing opportunities and grants. In addition to saving money I need to make sure I get as much productivity as possible out of the equipment I purchase. When I upgraded our office furniture and data center I was able to get great terms on the entire package. There are several online dealers that will give you great prices and leasing terms. Take a look at the prices on the latest data / LAN racks and cabinets before upgrading your back office resources. Discount office furniture gave me the best terms.

Posted by: Cheryl's Desk | January 30, 2008 12:27 AM

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