Health insurance costs squeezing out small businesses

By Tim Bonfield
The Cincinnati Enquirer

For those who think the rising costs of health benefits have been tough on corporate America, try paying for benefits as part of a small business or as a self-employed worker.

Not only do small businesses and self-employed people have more trouble affording insurance, their employees are less able to cope with uncovered bills.

"Rising costs for small businesses lead more directly to people becoming uninsured," said Alwyn Cassil, spokeswoman for the Center for Studying Health System Change. "Small employers are less likely to offer health insurance."

Smaller employers have suffered sharper price increases for health benefits than larger employers for the past several years. This gap matters, experts say, because troubles facing small businesses are more likely to increase demand on budget-pinched state Medicaid programs and more likely to push families into bankruptcy over uncovered health bills.

Hawai'i requires employers to offer health insurance to any employee working more than 20 hours per week under the Prepaid Health Care Act of 1974. To avoid health insurance costs, employers can keep workers at less than 20 hours a week or hire contract workers.

Nationwide, employers are considering health plans that sharply increase deductibles for care, reduce covered benefits or limit who can be covered. Such changes can expose a family to thousands of dollars in uncovered bills if serious illness occurs.

"Five years ago, we didn't see healthcare raised as an issue much at all. But now, we're seeing people in low-wage jobs where the employer won't offer health insurance, or the worker is opting out because they can't afford the premiums," said Trey Daly, a senior attorney at the Legal Aid Society of Greater Cincinnati.

Now, 47 percent of Legal Aid clients cite healthcare bills as a key reason for seeking bankruptcy protection. The average debt reported exceeds $5,000, according to a report issued earlier this year.

What worries Daly is that employers are shifting costs to workers and cutting coverage at the same time many states are facing budget crunches.

"This is a scary combination of events," Daly said. "There is tremendous fiscal pressure on the Medicaid program. And if employer-based health benefits become unaffordable, we're going to see a bigger increase in the numbers of uninsured."