Study confirms small-business insurance woes

The federal government recently learned what small-business owners already knew: small employers have a tough time finding affordable health insurance.

Small employers seeking to provide health insurance benefits for employees run into obstacles from both insurers and the state laws that are supposed to improve access, according to a new study.

"Small Business and Access to Health Insurers, Particularly HMOs" was sponsored by the U.S. Small Business Administration's Office of Advocacy and researched by Consult Inc., of Orangeburg, S.C.

"Previous studies by the Office of Advocacy have found that small firms are less likely to offer health insurance, often because they are unable to afford it," said Chief Counsel for Advocacy Jere W. Glover in an SBA release. "This study sheds new light on some of the other obstacles small firms face in finding affordable providers."

Nearly every state has extensive mandates and rules requiring insurers to offer health insurance plans for small as well as large businesses in order to operate in the state.

Some of these mandates drive up the cost of premiums, eroding affordability.

Also, the report shows that health insurance companies apparently ignore many of the regulations, including some states' definitions of small business, according to a survey of 50 health insurance plans in 10 states, conducted as part of the study.

Consult Inc. also conducted focus groups and interviews with several dozen small businesses in South Carolina.

Most of those businesses did offer health insurance plans to employees, and half of the remaining firms reported they were actively seeking to offer health coverage.

Employers with and without health plans agreed that employee health insurance is an important benefit for recruiting and retaining workers.

The focus group participants indicated that they felt they did not receive adequate information or service from insurance providers, noting that insurance company marketing agents often do not disclose information about low-cost plans because the agents receive smaller commissions on such plans.

Although policy makers are eager to broaden health insurance coverage to more workers, some mandates drive up costs. This makes insurance less affordable for very small firms or for low-wage workers. Other regulations are ineffective because they are ignored, according to the study.

The researchers found many insurance companies had recently dropped out of the market and had great difficulty getting insurance companies to respond to the survey, despite repeated attempts to contact the companies.

Other researchers have had similar difficulty. These problems may be contributing to small employers' frustrations in finding affordable, stable coverage, according to the release.

"Small Business and Access to Health Insurers, Particularly HMOs" is available on the Internet at www.sba.gov/advo/research/rs202tot.pdf.