Fewer Employees, Higher Health Insurance Costs

Businesses with fewer than 10 employees spend more on healthcare, survey says.


I've written about how one of the biggest problems small-business owners have to deal with is buying health insurance for their employees when the costs are rising so dramatically. The National Association for the Self-Employed released the results of a survey today that gives us some more hard data on the issue. The survey is based on a sample of 4,000 "micro-businesses"—those with 10 or fewer employees—so it tells us about only the smallest of small businesses.

The results drive home how much more expensive it is for small businesses to pay insurance premiums—median costs rose from 3.7 percent of a business's total revenue to 5.5 percent. But they also offer some surprising statistics that aren't so negative—some of the smallest firms of this already small group actually saw a greater increase in access to health insurance than other firms. In 2005, 13.8 percent of businesses with under $50,000 in gross sales offered health insurance in 2005. Now that number is up to 40 percent.

The share of micro-business owners who have health insurance for themselves grew from 54.9 percent in 2005 to 67 percent in 2008. Some of that increase, however, might have been made possible for micro-businesses by cutting back on health spending for their employees. The proportion of respondents who buy coverage for their full-time employees dramatically fell from 46.2 percent to 18.6 percent.