Cost prohibits small businesses from offering health benefits

Guy Boulton

Oct. 22, 2008 (McClatchy-Tribune Regional News delivered by Newstex) -- The majority of employers who don't offer health benefits said they would not contribute more than $50 a month toward the cost of providing coverage, according to a survey by Mercer, a benefits consulting company.

Nearly all of the employers had fewer than 500 workers.

The most commonly cited reason was the cost, with 43% of those employers stating they could not afford to offer health insurance for their employees, according to the survey. The results suggest that finding a way to expand coverage for people who work for small employers won't be easy.

"We have been dancing around this really tough issue -- that small employers can't afford coverage," said Linda Havlin, a partner at Mercer, a subsidiary of Marsh and McLennan Cos. (NYSE:MMC) "And, in some ways, we have been ignoring that in the debate on health care reform."

The results are from a survey of more than 3,400 employers, including 545 who do not provide health benefits. The survey has a margin of error of plus or minus 3%.

Among employers who don't offer health insurance for their employees, 59% said they would be willing to contribute no more than $50 a month to the cost. Only 10% said they would contribute at least $200 a month.

Nationally, premiums for health insurance offered by employers averaged $12,680 for a family of four and $4,704 for single coverage this year, according to a survey by the Kaiser Family Foundation, a health policy research organization, and the Health Research and Educational Trust, an affiliate of the American Hospital Association.

Those averages include large and small employers. Yet health insurance rates for small employers are tied to their employees' health and can vary significantly.

A small employer with older workers who have health problems may pay much higher rates than the national average while an employer with healthy workers may pay much less.

The Mercer survey found that the high cost was not the sole reason some employers don't provide health benefits. Others reasons included employee turnover and the perception that employees would rather have higher wages in place of health benefits.

The survey's results were no surprise to the National Federation of Independent Business.

"Given the revenues of their businesses, they can't afford it -- end of story," said Bill Smith, state director for the organization.

The National Federation of Independent Business is among the organizations working to make health care reform a priority in this year's presidential election. Those efforts have included working with a variety of groups across the political spectrum.

"Small businesses are the victims of a system that has not worked very well for us," Smith said.

The survey by the Kaiser Family Foundation and the Health Research and Educational Trust found that 49% of employers with three to nine employees offer health benefits while 62% of those with three to 199 employees do.

"The facts speak for themselves here -- not only are they not providing coverage but they are more likely to drop coverage," said Havlin, of Mercer.

Havlin noted that proposals to reform health care and expand coverage will require different solutions for different types of employers.

They also are likely to cost money. Wayne Corey, executive director of Wisconsin Independent Businesses, whose members average about seven employees, doesn't expect the federal government to be in a position to finance health care reform for a number of years.

Historically, the longer a small business was in business, the more likely it was to offer health benefits, Corey said. But that may have changed.

"I don't think we can say that's a template that will keep working," Corey said.

Newstex ID: KRTB-0130-28915832