Health insurance more expensive for small businesses

June 3, 2008 — The economic burden of providing health insurance for workers increased more for small businesses than for large ones from 2000 to 2005, but the spike did not cause a significant number of small employers to abandon the benefit, according to a study issued by the RAND Corporation.

Small businesses (those with 25 or fewer employees) saw the expense of providing health insurance rise by nearly 30 percent during the study period — significantly more than the hikes experienced by medium and large businesses examined by the study.

Researchers found no evidence that small businesses were more likely than large employers to quit providing health insurance for their workers, although small employers did remain less likely to provide health benefits to workers.

The study from the Kauffman-RAND Institute for Entrepreneurship Public Policy explores trends in the economic burden of providing health insurance, the distribution of the burden for small and large businesses, and the quality of the health plans businesses offered.

The study found that typical businesses offering health insurance spent between 7 percent and 10 percent of their payroll on health insurance. But small companies saw their share grow from an average of 8.4 percent in 2000 to 10.8 percent of payroll by 2005, an increase of nearly 30 percent.

The study, “The Economic Burden of Providing Health Insurance: How Much Worse Off Are Small Firms,” can be found at www.rand.org.

 Source: The RAND Corporation, www.rand.org