HEALTH CARE HEADACHE FOR SMALL BUSINESSES

by Lesley Politi on February 5, 2009

It’s getting ugly out there for small business owners that have been struggling to keep on paying high health insurance premiums for themselves and their workers. So ugly, in fact, that more and more are just dropping coverage.

Because of ever-escalating premiums and falling sales, Craig Sumsky, director of Philadelphia-based DJ company Cutting Edge Entertainment, had to put the kibosh on health insurance for his office manager this year.

In response, Sumsky’s office manager handed in her two-week notice. She needed a job that could get her benefits, he said.

Sumsky is not alone. One recent poll put out by credit card company Discover uncovered a disturbing trend:

“Eighty-five percent of small business owners say they do not offer health insurance to their employees, up significantly from 77 percent a year ago and 74 percent in January 2007. Among small business owners who do offer health insurance, 36 percent say they have considered discontinuing coverage because of high costs.”

These statistics are not so shocking. Faced with the ridiculous cost of health insurance and a lousy economy, small firms are looking at what else they can cut to make ends meet, and too often they turn to cutting health insurance.

“Over the last two years, the number of small business owners who offer health insurance to their employees has fallen significantly,” said Ryan Scully, director of Discover’s business credit card unit. “While small business owners are finding ways to stay afloat in this tough economy, eliminating healthcare benefits could be another measure of the cost of that resiliency.”

Not all small firms are getting rid of coverage. Some are trying creative ways to hang on, notes Donald Mazzella, editor of Small Business Digest.

He said some firms are asking their employees to take on more of the burden of the premium. And they’re cutting back on coverage and increasing deductibles. (Of the 1,024 employers that responded to a recent Small Business Digest survey, 55 percent said they had increased the deductible, while 34 percent said they had made family coverage more expensive.)

Mazzella offers some words of advice to entrepreneurs who are struggling to keep up with insurance premium payments:

1. Look at health savings accounts, or HSAs, as a way to reduce costs. In many states the overall costs to employers and employees are greatly reduced, and employees can use the funds for retirement. (This could be useful because many companies are cutting back on their 401(k) contributions.)

2. Some smaller employers are providing stipends to employees to purchase their own insurance. (One caveat is that some employees may not qualify for individual plans.)

3. Shop around diligently and look at alternative offerings as some less well-known insurers — some are offering bargains.

When it comes to healthcare costs, Cutting Edge Entertainment’s Sumsky seems to be at his wits end.

“We have been quite successful, which is why it kills me,” he said, referring to his company’s inability to afford healthcare for his office manager. “Health insurance seems to have become more of a luxury than a necessity.”

Sumsky is even considering dropping his own health coverage, and that would be quite a dicey proposition since he’s an amputee and needs insurance for maintenance of his prosthetic, without which he wouldn’t be able to work.

The cost of health care is one of the most frustrating things I have written about. Paying for health insurance shouldn’t be stomping on the entrepreneurial spirit in this country.

What do you all think? Do we need to start knocking some heads together in Washington?

Hope ain’t going to fix this!

Source: yourbiz.msnbc.msn.com

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