Shrinking Coverage

By Jennifer Hopfinger
February 11, 2009 04:05 PM

More than half of uninsured Americans are small business owners, employees, or their dependents, and the percentage of small businesses offering health insurance to employees is rapidly shrinking, according to the February issue of Fortune Small Business. Premiums are soaring across the board, and small businesses already pay 18% higher average premiums than large companies. “In short,” writes Richard McGill Murphy in the editor’s letter, “small businesses bear the brunt of America’s health-care crisis.”

The cover story, “Health Cure,” has an upbeat headline but writer Patricia Gray reports on a dire situation. “The escalation of the health-care crisis couldn't come at a more difficult time. Sales and profit margins are dwindling amid a weakening economy and a credit crunch. As a result, companies can no longer pass higher health-care costs on to their customers,” she writes.

But many entrepreneurs are trying to find ways to keep their employees covered and the article details some of their strategies for cutting insurance costs.

Some of them are obvious: choosing plans with high deductibles, banding together with other small firms to qualify for lower group rates, imposing long waiting periods before new hires become eligible for coverage.

Others are more creative. A small business owner quoted in the article said he switches insurers every year to qualify for low introductory premiums, even though it involves mountains of paperwork. Another entrepreneur said she signed up for one college course per semester, which qualified her for cheap student health insurance. Unfortunately, one small business owner has gone the risky route of simply paying his employees’ medical expenses out of his own pocket--a dangerous precedent that could make him legally liable for their catastrophic illnesses.

Small businesses have little choice but to try innovative measures as they await healthcare reform, and the article isn’t very optimistic about those prospects either: “President Barack Obama has promised reform, but health care is only one item on an urgent to-do list that is also crowded with two wars, a ballooning budget deficit and a faltering economy. Health care may indeed get a sweeping overhaul under the new administration, but policymakers will probably exercise caution in changing a system that accounts for 16% of the U.S. economy.”

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Copyright © 2009 Donald W. Reynolds National Center for Business Journalism