A major concern faced by many small business owners today is the cost of their employees’ health insurance. As per the report released by the National Federation of Independent Business (NFIB) Research Foundation’s Small Business Problems and Priorities survey that takes into account the time period of last four years, the ever-increasing cost of health insurance is the top most problem faced by the small and medium businesses today. Twenty thousand members of NFIB participated in this survey. They were asked to evaluate 75 potential problems on the scale of 1 to 7, where 1 is a “critical problem” and 7 is “not a problem.” The cost of health insurance was evaluated as the critical issue by 52.3% of the participants of this survey.
As per the study conducted by the Medical Expenditure Panel Survey (MEPS), the premium for an individual health insurance plan per employee in the year 2001 was $2,889. This figure had increased to $5,963 in the year 2015. The reasons for the escalation in the cost of the premiums are the changes made in the compositions of the health insurance plans and also in the rates offered by the employer.
The deductibles for an individual health plan cost $446 while for businesses with less than 50 employees it was $602 in 2001. However, in 2015 the deductibles for small businesses with employees less than 50 increased by more than three fold. In brief, the small businesses have paid more for health insurance plans in the last fifteen years.
Why Health Insurance Is No Longer Viable For Small Businesses
Non-feasibility- Many small business owners with employees less than 50 are of the opinion that offering health insurance to their employees as an employee benefit is no longer feasible. It should be noted that only 29 percent of the small businesses offer health cover since the five years of the implementation of Affordable Care Act (ACA).
Non-willingness to offer health benefit- The report by NFIB Research Foundation also reveal that many of the small businesses are not willing to offer health benefits because of the cost factor. In 2015, a few small businesses found to reimburse the amount for employees who purchase individual health plans rather than offer their own health insurance. As per the survey reports of 2015, many of small businesses were subjected to heavy fines of $100 per employee per day for violating the new health care rules.
Wage Stagnation- The increase in the cost of health insurance is leading to wage stagnation. Data from the Bureau of Labor Statistics reveal that over a decade and half, health insurance has increased as a percentage of a total hike in the wages. This in turn has resulted in the decrease in the take home salary of the employees.
Unable to hire highly skilled labor- With the hike in the health insurance costs and decrease in the take home pay has led to an increasing scenario of many small business owners unable to afford highly skilled and qualified employees. To retain a highly skilled employee, a small business owner is forced to increase the compensation. When the cost of the health insurance increases, the employers who do not have to offer this benefit will not offer it to the employees. While those small businesses who are obliged to give this employee benefit will be forced to cut the wages or also find ways to replace highly skilled employee.
This issue has to be addressed at the earliest as the ever increasing price of health insurance doing business in the United States of America is fast becoming expensive for the small business owners.
