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Home arrow Report Categories arrow Finance arrow Small Business Health Insurance

Small Business Health Insurance

April 21 2009

Small Business Health InsuranceSmall business employees are much less likely to have access to employer-sponsored health coverage than the employees of larger firms.  According to the Kaiser Family Foundation:

  • Of the 45.7 million U. S. residents without health insurance, 20 million are employees - or in the families of employees - of businesses with 50 or fewer employees.
  • Among companies with more than 50 employees, 95.6 percent of workers have health insurance, compared to 42.6 percent of individuals working for small businesses. 

Undoubtedly there are many reasons why small businesses are less apt to offer health coverage to their workers than larger firms.  However, one likely reason is that small businesses encounter a host of costly state regulations and mandated-benefit laws not faced by larger employers that self-insure.

Small Businesses Face Higher Costs.  Since 1999, the cost of employer-provided health insurance has risen 120 percent, or four times faster than prices generally, according to the 2008 Kaiser Family Foundation Employee Health Benefits Survey.  The Commonwealth Fund estimates that small businesses face higher than average costs:

  • Insurance premiums for small businesses are 18 percent greater than those paid by large companies.
  • Administrative costs account for up to 25 percent of the cost of premiums for some small business health plans, compared to 10 percent for large firms.

Continuing medical cost inflation only exacerbates the problems faced by small businesses.  Health care costs are expected to rise 10 percent in 2009, according to the consulting firm Pricewaterhouse Coopers. 
Annual Family Policy Premiums

Why Costs Are Higher for Small Businesses.  Costs are higher for small-group insurance because states require small-group health policies to cover certain conditions, treatments and providers. Large employers often self-insure. Their plans are governed by federal law rather than state regulations, and federal government mandates fewer benefits.  Small group premiums vary widely by state, and the highest premiums are in the most heavily regulated states.

According to the Council on Affordable Health Insurance, there are more than 1,961 state-mandated benefits that insurance companies are required to offer in their health plans, adding to the cost of small group health insurance.

  • Mental health parity is one of the most expensive and pervasive mandates - 47 states require insurers to cover mental health conditions, adding 3 percent to 5 percent to premiums, according to CAHI estimates.
  • Forty-six states require coverage for chiropractors, 11 states mandate acupuncturists and four require coverage for massage therapy.
  • Four states require coverage of naturopaths, who utilize food and herbal remedies to complement (and sometimes in place of) surgery or drugs.

In Massachusetts, the Division of Health Care Finance and Policy reported that 13 cents of every dollar spent on health care goes to cover mandated benefits.  CAHI estimates that these mandates add 20 to 50 percent more to the cost of insurance, depending on the state. ...

Download Small Business Health Insurance

You can download Small Business Health Insurance in PDF format.

Brief Analysis No. 642
by Daniel Wityk

Dallas Headquarters:
12770 Coit Road, Suite 800
Dallas, TX 75251
Fax: 972.386.0924


People should be able to purchase, with pretax dollars, health plans that are portable from one job to the next, just as group plans do. Employers should be able to help pay the premiums on those individual plans. 

To avoid costly state mandates, small businesses should be allowed to purchase plans similar to those purchased by large companies that self-insure.  If sections of ERISA are rewritten or association health plans allowed, small businesses could create a national marketplace where insurance companies and care providers compete for individuals on price and quality.


The National Center for Policy Analysis (NCPA) is a nonprofit, nonpartisan public policy research organization, established in 1983.

The NCPA's goal is to develop and promote private alternatives to government regulation and control, solving problems by relying on the strength of the competitive, entrepreneurial private sector. Topics include reforms in health care, taxes, Social Security, welfare, criminal justice, education and environmental regulation.

Comments (3)add comment

charlie blackhawk said:

Great points you have in your blog jonathan! I know that video advertising marketing and link exchange is very important to small businesses. After getting booted off you ,there are sites like htt:// that gives you free link exchange,video uploads and even a simple web page that will link to your business site. very impressed with this comany.

Using video to promote products and services really does work.iof just putting any old corporate video up there. If you want to make sales via your web site, Video is a MUST have.
June 19, 2009

Jonathan Wallace said:

Medical insurance is so important, you never know what may happen! Its just as important to have a good advertising campaign on your side!!!
Gorilla marketing in today's economy is everything, marketing to get through the recession!
If your interested in web optimization for your site, there is a free site for uploading video ads for your business, they also have image uploads if you are not yet up to videos. The more sites you can link to the greater your market will be. They have a free link exchange as well.
June 18, 2009

Care said:

Prescription costs have become increasingly difficult to manage. My family and I started saving by switching to generic drugs. allows you to type in your drug name, dosage and zip code to search for and locate prescription drugs that are available on discount generic programs across the United States; many of which are available for as little as $4. Prescriptions that are not available on a discounted program often have therapeutic alternatives on a discounted generic program, which are also available on

April 21, 2009

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