Posts Tagged ‘Catch22’

Small Business Health Insurance: Escaping The Catch-22

As the economy continues to tank so do the number of Americans without health insurance-and the number small business owners who can afford to insure their employees.

A recent survey by the NFIB Research Foundation, a small business advocacy group, showed that only 47 percent of small business owners offer employee health benefits. Those employing 20 or more people are more than twice as likely to offer employee health benefits as those with fewer than 10.

The survey found that the low numbers are primarily the result of new small businesses opting not to cover employees. Most small businesses who offer benefits have offered them for a while and are reluctant to drop them for fear of losing good employees.

"It's much better for employee morale if a small-business owner never offers health benefits, than it is to offer them and then be forced to take it away because it is too expensive to continue," said William J. Dennis, NFIB's senior research fellow. "Small-business owners experience considerable turmoil in their early years. They often experience cash flow problems and are reluctant to incur additional expenses such as health insurance. What's new to this picture is that it appears that new small-business owners are waiting longer or choosing not to offer health insurance benefits to their employees at all."

The fact that new small businesses are choosing not to offer benefits is a disturbing trend because of the swift turnover of the small business population. If the trend continues, the number of employers who never offer benefits will increase. And that will hurt small businesses because it will limit thet talent pool from which they draw.

What Can Be Done?

Small businesses aren't alone in struggling with the cost of health care (and premiums) in the current economic climate. The U.S. Census Bureau reports 47 million people, or 15.8 percent of the U.S. population, were without health insurance during 2006

Unfortunately for the small business owner, new legislative approaches to help the uninsured may actually hurt them. One popular option is the "pay-or-play" mandate, in which employers are required to either provide health insurance for their employees or pay a penalty to offset costs the government incurs to provide health care for the uninsured. The rules likely would only apply to full-time employees.

Proponents say such mandates could significantly reduce the ranks of the uninsured, since the vast majority of the uninsured are in families with at least one full-time worker. Many of these are low-income families, suggesting that such measures could benefit the working poor.

Opponents argue that many low-wage workers will just be paid less, reduced to part-time or laid off to offset the insurance costs.

In their paper, "Employer Health Insurance Mandates and the Risk of Unemployment," researchers Katherine Baicker and Helen Levy found several factors affect the extent to which such mandates cost more jobs:

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