Health Insurance for Small Business

Think it's difficult for big companies to shoulder rising health insurance costs? Try doing the same thing on a small-business budget.

"For our very small businesses, it's probably the most challenging circumstance under which people buy insurance," says Kim Holland, an executive committee member of the National Association of Insurance Commissioners and state insurance commissioner for Oklahoma.

In fact, most of the nation's uninsured are small-business employees or their families, Holland says.

While 99 percent of large companies offer health benefits, the number falls to 49 percent for companies with three to nine employees, according to a 2008 survey by the Kaiser Family Foundation and the Health Research & Educational Trust.

That's no surprise when you look at the numbers. According to the National Federation of Independent Business, health premiums for small business plans have doubled in the last eight years. And for smaller companies, those dollars comprise a larger share of their revenues. On top of that, small businesses pay an average of 20 percent more for their health insurance, says Amanda Austin, senior manager of legislative affairs with the NFIB.

Caitlin Friedman, partner in the boutique, New York public relations firm YC Media, has seen her group premiums increase 16 percent this year. She estimates that it now takes the entire revenues from one client to cover the company's health insurance premiums every month.

"If you're a small business, that's a lot," says Friedman, who is also the coauthor of "The Girl's Guide to Starting Your Own Business."

Geography makes a difference
Since states regulate insurance, the landscape for business owners seeking coverage can vary widely by geography. Some states subsidize small business insurance plans. Others allow small businesses to band together to take advantage of group buying power. In addition, in some states, sole proprietors are guaranteed group coverage, the so-called "group of one," while others require at least two people to qualify.

For very small businesses, "the good news is that almost every state has adopted some sort of group reform law that ensures small businesses can get insurance for employees," Holland says.

For individuals, states may have or may be developing pools that "allow individuals to access coverage on a more affordable basis," she says.

A smart move for small-business owners is to brush up on the rules in your state. Talk to several insurance agents, preferably those who work with a number of different carriers, to find out what kind of coverage is available for your business. And call the state insurance department to learn more about the rules and options in your area. Another source is your local chamber of commerce, says Eric Tyson, coauthor of "Small Business for Dummies."

"Everybody right now is price-conscious," says Scott Leavitt, president of the National Association of Health Underwriters. Regarding health insurance, that means some employers are eliminating jobs, switching plans or carriers, dropping coverage, raising deductibles or asking employees to pay more of the costs themselves.

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