Health Care and the Small Business Owner


doctorsAccording to the Medical Expenditure Survey Panel, only 34.1% of small businesses with less than 10 employees offer health insurance. This is largely due to the high premiums associated with employer-based insurance which went up more than 9% for the fifth consecutive year in 2005. In fact, recently Aflac conducted a survey which questioned 501 small business owners to see how they perceived health benefits to influence employee retention. 37% of those surveyed said they believe their inability to retain good employees is influenced by their health benefits (or lack thereof). 49% said they believe they can’t attract good employees without competitive health insurance.If you’re a small business owner, this isn’t news to you. Regardless of whether or not you have employees of your own, health care is a weighty issue for the self-employed. Here are some things you might want to consider if this is something you worry about.

Small-Business Health Care Bill

While a bill recently failed to approve legislation allowing small business owners to pool together to reduce risk and lower health care costs, a revised bill may be reintroduced. Health, Education, Labor and Pensions ranking member Senator Michael Enzi sponsored the bill last year and has promised to reintroduce the health care bill to Congress again this year.Some concerns exist that the new bill would lessen coverage to participants. And because these plans would not be restricted by state requirements, opponents argue that coverage would not be as comprehensive. Some fear it would drive up costs for services not covered by these plans.Others are more optimistic. Senate Finance Chairman Max Baucus said, “Purchasing pools would bring together large numbers of small purchasers, both individuals and small businesses, and allow them to take advantage of group rates for coverage.”

Consumer-Driven Health Care Promoted by the President

In his State of the Union address, President Bush proposed changes to tax law that would promote consumer-driven health care. Currently tax benefits are extended to employers; changes in the tax code would enable employees enjoy the tax benefits associated with their health insurance. Employees would also be more involved in developing a plan that best suits their needs rather than picking from a menu of prepackaged plans. The changes would also increase tax benefits for the self-employed, lowering insurance premiums and increasing health care options.

Health Savings Accounts (HSA)

HSA’s are an example of consumer-driven health care. This health care plan is attractive to small business owners and their employees because it couples health insurance with a tax-deductible account with which to pay health care costs. Benefits of this plan include:

  • highly-deductible health care
  • a Health Savings Account which enables participants to contribute amounts equal to their deductibles
  • money placed in HAS is tax deductible
  • ability to roll-over HSA contributions
  • penalties are not charged for participants who are over 65 and withdraw money from HSA for non-medical reasons

While health insurance may have been a sore spot for small business owners in the past, it looks as if forces are converging to make changes that would benefit the self-employed and any of their employees. Stay informed and you too can take advantage of some of these changes.

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