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Small Business Digest


Survey Shows Rising Healthcare Costs Concern Small Business Owners

A year-to-year survey of small firms shows a growing concern on healthcare costs despite rise of HSAs and other cost containment offerings.

This year's survey by Surepayroll found that despite rising costs, 69% of small business owners offer healthcare -- an increase of 19% over last year -- and that all of them plan to continue offering it in 2008.

While many small business owner respondents said they offer a healthcare plan to employees because "it's the right thing to do," the same amount (37%) said the main reason they offer a plan is so they can attract quality employees.

"We need to be able to offer the right plan to attract the right people, but it's almost too expensive to do," replied one respondent.

SurePayroll President Michael Alter says in a competitive labor market small businesses must offer plans, even if it hurt their bottom line.

"To stay competitive, more small business owners are offering healthcare and know they must continue offering it -- even though it is a drain on business," said SurePayroll President Michael Alter. "Most of them know the current healthcare situation can have major, negative economic effects, and are putting pressure on the government to find a solution."

SurePayroll conducted the survey as a follow-up to its July 2006 small business healthcare survey, which found that 58% of small business owners offered healthcare plans, 11% of which were unsure of whether or not they would continue offering benefits in 2007, depending on costs.

Of the 32% of small business owners who said they currently do not offer healthcare benefits, the largest amount (52%) said it was because plans are too costly.

In addition, 49% of these business owners said they did not plan on offering a healthcare plan in the future, while 43% said their decision whether or not to offer in the future depended on the cost of plans.
SurePayroll's 2006 survey found similar results. Last year, 44% had no plans to offer a healthcare plan in 2007, and 46% said they decision depended entirely on plan costs.

"Due to spiraling health insurance premiums (annual increases of 12% to 20%), I am seeing many small business owners decreasing the level of coverage for employees," stated one small business owner. "This is only adding to the problem, since more employees are now going under-insured. I believe that we will face a healthcare crisis in the U.S. in the next 5-10 years as a result."

Additional Findings:

  • 64% of small business owners who currently offer healthcare do so in the form of PPOs (Preferred Provider Organizations), while 21% offer HMOs (Health Maintenance Organizations) and 15% offer a combination or different plan.
  • The largest amount (58%) who offer healthcare plans contribute 81% to 100% to the overall cost. The next largest group (17%) contributes 41% to 60%.

Some small business owners offered additional insight on healthcare in relation to small business:

"I would prefer a universal system that employees pay into, like social security. Healthcare should not be controlled by 'for profit' companies. Providing healthcare should be removed from the employer's list of responsibilities."

"It is a better value to me and my employees to provide health insurance rather than increase their pay and expect them to pay for it with after tax money."

"Healthcare benefits are a must for attracting and keeping talented professionals. As a small business, we pride ourselves at providing the best healthcare benefits money can buy. As a benefits manager for over 20 years, I've been very concerned about the declining quality of healthcare and increasing costs. Something has got to be done; it is time for a change."

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