Smallest businesses battle high healthcare costs

June 17, 2008 — Healthcare costs hit the smallest businesses in the United States, often cited as the backbone for economic growth, harder than their larger counterparts, according to a just-released survey by the National Association for the Self-Employed (NASE).

The survey of nearly 4,000 micro-businesses, a follow-up to research conducted in 2005, shows that high cost continues to be the most significant barrier to offering health insurance and that small businesses strongly feel they are at a disadvantage compared to their larger counterparts when it comes to access to coverage.

• About two-thirds (67 percent) of respondents said they have personal health insurance coverage, up from 54.9 percent in 2005;

• The percentage of responding businesses whose plans cover full-time employees dropped from 46.2 percent in 2005 to 18.6 percent in 2008;

• More than 65 percent cite cost as the single most significant barrier to offering health insurance to employees;

• Median costs for healthcare insurance rose from 3.7 percent of total revenue to 5.5 percent.

The survey also shows that small businesses with the least end up paying the most in terms of health-insurance costs. Micro-businesses grossing less than $50,000 annually spend a median of 17.6 percent of their gross 2007 sales on health insurance, compared to a median of only 1 percent spent annually by companies generating more than $500,000 annually.

While most respondents (59 percent) say the company pays the entire premium for health insurance, it is becoming more common for employees to not only be responsible for a share of their premium, but also pay a larger proportion. The average amount of the premium employees have to pay increased to 87 percent in 2008 compared to 64.5 percent in 2005.

Source: National Association for the Self-Employed, www.NASE.org