Many small businesses are worried that rising health insurance costs are choking their growth and hindering the creation of new companies, and they fear health care reform plans being debated in Congress and by the Obama administration could end up costing them even more in taxes, according to business advocates.
A survey of views on those costs released yesterday by the U.S. Public Interest Research Group, which includes its counterpart Maryland PIRG, found that 29 percent of the 343 small businesses they interviewed were able to offer insurance. Of the 21 businesses surveyed in Maryland, nine provided health coverage and nearly all said their insurance costs rose over the past year.
A dozen Maryland small-business employers said difficulties with health care would prevent others from starting their own businesses in the future.
Nicholas Green, a field organizer with Maryland PIRG, said the report was not scientific but intended to be a "real human snapshot" of the struggles that owners of small businesses and their employees face.
"Rising health care costs are choking American small businesses just when we need them the most," Green said.
Carma Halterman, a coffee shop owner in Charles Village, said the costs - around $300 a month per employee - are too prohibitive for her to offer insurance.
"We go for days and weeks sometimes with a nagging medical condition, avoiding the cost of treatment, and that really affects my bottom line and productivity," said Halterman, 46, owner of Carma's Cafe, while joining Maryland PIRG officials in the report's release Tuesday outside her shop.
The U.S. PIRG report comes as the debate on health care reform ramps up in Washington, with the Obama administration and congressional Democrats facing criticism from Republicans that their plans would be more costly to taxpayers.
A Senate bill would put the cost of health care reform at about $600 billion. A House bill, which passed through the Ways and Means Committee on Friday, would allow the uninsured to get a public or private insurance plan, or keep the plan they currently use. An estimated 47 million people in the U.S. lack health insurance.
About half of the House bill's $1 trillion price tag would come from Medicaid and Medicare changes, while the other half would come from a variable surcharge on 1.2 percent of the wealthiest Americans, those making $350,000 or more.
Businesses with fewer than 25 employees would get a tax credit, but employers and individuals could face tax penalties if they don't offer and buy insurance under the House plan.
In Maryland, the U.S. Small Business Administration's Office of Advocacy estimates that businesses with fewer than 500 employees - which they defined as a small business - numbered more than 112,000 in 2006, the most recently available data. Most of the businesses surveyed by U.S. PIRG were even smaller, with 50 employees or less.
According to the U.S. PIRG survey, more than three-quarters of the small-business owners they surveyed who don't offer health care felt stymied in doing so due to high costs, complications and red tape.Of those businesses that could afford coverage, 55 percent indicated that they did so for business reasons - to attract competitive employees - and not altruistic ones, the survey found.
Employers have a delicate balancing act to achieve with their benefits package. On one hand, they need to be able to attract and retain excellent staff, while on the other hand, ever-increasing costs of key benefits such as medical insurance are forcing them to make tough and often unpopular benefit choices.
In many companies, particularly small- to medium-sized businesses, this scenario has resulted in the reduction or elimination of important insurance benefits such as life, disability, dental, vision and health. When the employer simply cannot carry the financial burden of providing a comprehensive suite of insurance benefits, employees have been left to their own devices to either secure coverage on an individual basis, often at higher rates, or to go without insurance coverage and hope for the best.
Not only is this a risky proposition for the employee, it puts the employer at a serious competitive disadvantage.
Voluntary benefits bridge the gap
Fortunately, the popularity of voluntary benefits has continued to grow helping to bridge the gap between employees’ needs and employers’ budgets.
Voluntary benefits are made available by the employer but paid for by the employees who choose the benefits. This can be a great option for employers who understand employees’ need for protection and who want to continue to offer employees the benefit of group insurance coverage without further stretching their benefit dollars. In addition, voluntary products are offered at group rates and premiums are paid through convenient payroll deduction. Here’s a look at potential voluntary benefits:
Life insurance. A 2004 LIMRA International study found that 53 percent of U.S. households do not have enough – or any – life insurance. Employers who offer a low group life benefit (e.g. $15,000) may want to consider voluntary term life, which is an easy and affordable coverage to add to the organization’s benefit package. An employee can purchase coverage on his/her life and the lives of his/her spouse and children as well.
Dental insurance. Employers may not feel able to offer dental insurance on top of medical benefits, but a study by Greenwald & Associates in 2000 found that more than 75 percent of employees rated dental insurance as “extremely important or important” for themselves and their dependents. Providing dental insurance as a voluntary benefit gives employees affordable access to comprehensive dental benefits without expense to the employer. In fact, offering voluntary dental benefits may reduce the company’s medical costs through early detection of health concerns such as oral cancer or pre-term pregnancy complications due to periodontal disease with preventive care.
Disability insurance. Disability is a very real threat that most of us don’t want to think about. The Health Insurance Association of America reports that one in three American workers over age 30 will become disabled for at least three months at some point in their career. Yet less than half of U.S. employers with fewer than 100 employees offer disability insurance. Both short-term and long-term coverage is essential to protecting employees’ futures, and one or both can be offered on a voluntary basis.
Vision insurance. According to the Vision Council of America, one in four kids has an undetected vision problem that can lead to difficulties in school. Vision coverage is less commonly offered as an employer-paid benefit, but voluntary vision insurance can give employees and their families access to affordable vision care benefits.
Health insurance. Ask the average employee what benefit they value most, and overwhelmingly, they will say health insurance. Employers know they need to offer health insurance to attract and keep good people, but it’s difficult to cope with the rising costs of providing this benefit – up to 40 percent for some companies in the last year. Business owners want to provide quality health insurance at a price their company can afford. To do that in today’s environment, it’s necessary to think creatively and beyond traditional medical benefit designs.
Employee education is key
Introducing voluntary benefits into a benefits package is most successful when employees have a clear understanding of the options available to them. Many employees do not realize there are gaps in their insurance and financial protection, and few seek advice from a financial professional. The 2006 Financial Well-Being IndexSM reports 73 percent of employees surveyed have not had a financial analysis of life insurance, disability income protection, retirement savings, savings goals, estate planning or education funding within the last three years.
Fear of intimidation or pressure sales seems to be the main reason for the lack of planning, as employees say they would welcome non-intimidating help. In fact, 83 percent of employees at small and medium-sized businesses reported interest in having access to financial planning as a benefit available through the workplace, and 61 percent said they expect it to be available to them at no cost.
Some voluntary programs, address this need by providing the services of a team of salaried insurance and financial professionals as part of the worksite enrollment process. When the employer chooses to offer these programs, employees meet one-on-one with a salaried insurance professional at the workplace. This professional provides an overview of the employer-sponsored benefits available, and then can also provide needs analysis tools to help the employee identify potential gaps in his or her coverage. Through the team of insurance and financial professionals, employees also have access to retail products such as individual disability, mutual funds, banking and more.
The result of this additional hands-on assistance is higher employee participation. Employees get the protection they need and employers gain the competitive advantage of offering a complete benefits package.
Managing benefits in today’s environment isn’t easy—it requires the flexibility to consider new approaches and a new employee/employer relationship. With the right tools, education, and team, the process can be relatively painless.
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