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Small Business and The Cost of Health Insurance

Health insurance products are as varied as those individuals and employers purchasing the insurance plan themselves. While seeking to expand coverage for small employers, it's critical to understand who offers health insurance, what small employers spend and the value of services that are purchased. Available data shows that:
 
Health Insurance Offer Rates by Small Employers
  • Forty-three percent of small firms with less than 50 employees offer health insurance to their employees. Ninety-six percent of small firms with more than 50 employees offer health insurance.[1]
  • Eighty-six percent of small firms that offer health insurance offer one health insurance plan option to their employees. Fourteen percent of small firms offer two plans.
Health Insurance Costs for Small Employers
  • The average health insurance premium cost in the small group market is $4,260 for individual coverage and $11,100 for family coverage.
  • Small employers pay on average 86 percent of the total cost of single employee health insurance and 65 percent for family coverage. 
  • Forty percent of small employers pay 100 percent of the total cost of single employee health insurance coverage, while 10 percent of large firms pay 100 percent of the cost.  
It’s not just the price tag of the plan, it’s the value of the plan
Although data is available to suggest what is being spent, the price tag isn’t a direct reflection on what small employers are getting for those dollars.
  • Small businesses, on average, pay about 18 percent more for health insurance than their larger counterparts for the same group of services.[2] Such data suggests that small employers either pay more for the same services or receive less (in terms of services) for their health insurance.
  • The figure cited above confirms that there is a difference between the price of a plan and the value of a plan. This is particularly true in small firms where it is found that such firms have “received slightly less generous health insurance benefits, according to calculations of actuarial value.”[3]

[1]Agency for Healthcare Research and Quality, Center for Financing, Access and Cost Trends, 2006 Medical Expenditure Panel Survey-Insurance Component.
[2]Commonwealth Fund, Benefits and Premiums in Job-Based Insurance, May 2006.
[3] Chu, Rose C.  and Gordon R. Trapnell, "Study of the Administrative Costs and Actuarial Values of Small Health Plans," Actuarial Research Corporation under contract no. SBAHQ-01-M-0811, January 2003.
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