The Entrepreneurial Mind

The primary reason for the decline in the number of small businesses providing health insurance appears to be that owners of new firms are reluctant to introduce health benefits, according to a National Federation of Independent Business Small-Business Poll released today. The poll on purchasing health insurance found that 52 percent of small-business owners do not offer either employee health insurance or an insurance purchase subsidy.

"It's much better for employee morale if a small-business owner never offers health benefits, than it is to offer them and then be forced to take it away because it is too expensive to continue," said William J. Dennis, NFIB's senior research fellow. "Small-business owners experience considerable turmoil in their early years. They often experience cash flow problems and are reluctant to incur additional expenses such as health insurance. What's new to this picture is that it appears that new small-business owners are waiting longer or choosing not to offer health insurance benefits to their employees at all."

Excluding those who switch insurers or go out of business, very few small employers drop health insurance benefits all together, about 1- 2 percent of the population annually.

For the 47 percent of small employers who do offer some type of employee health benefit, 36 percent offer insurance to all or most full-time employees, 5 percent offer insurance to some or a few full-time employees, and 6 percent offer premium reimbursement to employees who purchase health insurance on their own.

According to the poll, the owner or manager is the person most likely to shop on behalf of the firm for health insurance, and they rely heavily on insurance agents or brokers for guidance This does not always serve them well. Survey data found that agents/brokers did not raise the subject of Health Savings Accounts (HSAs) in 59 percent of cases involving their discussion of employee health insurance with small employers.

"This poll tells us that if small-business owners want to know about all of their health insurance options, they need to conduct their own research. They need to be able to ask their insurance agents very pointed questions about HSAs and other health insurance options," said Dennis.

I know this is wishful thinking on my part, but with over half of our workers employed in small businesses perhaps it is time to uncouple health insurance from our tax code. The system we now have in America is based on the economy of the mid-1900s when most workers were employed by large corporations (one in five worked for Fortune 500 during that era). Health insurance for employees was a loop-whole to that unions and corporations concocted to get around wage freezes post World War II. This same alliance used Nixon's wage freeze as a reason to move from high-deductible major medical plans to low deductible insurance plans.

Just as economic crises created the mess that is now our health insurance system, perhaps the impending train wreck that is today's health insurance model in the US can lead us to a consumer driven free-market model.