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More Affordable Health Insurance For Small Employers Could Boost Growth And Jobs Creation

Written by Ken Gaebler
Published: 9/13/2011

To help small business retain employees, there should be a better system to make insurance benefits more affordable for employers and employees.

Health insurance costs have been rising for individuals as well as small businesses. According to the Small Business Administration, small businesses pay 18 percent more than larger companies for similar insurance coverage.

Affordable Healthcare for SMBs

The main reason for this large disparity in cost is that small businesses often do not have enough employees to offset the risk that a few workers could be costly to insure, Bloomberg reported. In addition, large businesses can afford to self-insure and adhere to cheaper federal mandates.

With insurance providers offering a multitude of options that can often confuse employers, many small business owners change their insurance plans often in an effort to find a more affordable policy. In response to this purchasing behavior, many insurance providers take a short-term approach to health coverage for small businesses, the news source reported.

Authors of the American Economic Review recommends that small businesses use computer software to compare insurance plans so they feel comfortable with the plan they select. The review also recommends limiting the role of insurance brokers to avoid the possible commission affecting the agent's advice. This could be achieved through setting high required medical loss ratios, which would make it difficult for insurers to offer high commissions to agents.

Bloomberg, however, proposed insurers standardize health insurance policies so businesses could more easily compare them.

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