The Health-Insurance Crunch

Many microbusinesses can't afford coverage, but that hurts their growth. While the policy debate continues, one nonprofit offers help

There are 18 million microbusinesses (companies with 10 or fewer employees) in the U.S., employing more than 12 million people and generating $309 billion in annual payroll. The numbers are impressive. But it's discouraging to learn that 51% of these companies do not offer any form of health insurance, either for employees or owners.

"It's just too expensive," says Kristie Darien, legislative director for the National Association for the Self-Employed (NASE),, a nonprofit professional organization with a membership of 250,000. The NASE released a survey last year that showed many microbusiness owners who do provide medical coverage for themselves and their employees are struggling mightily with costs that tend to increase annually, even twice a year.

The rising costs are contributing to the general decline of employer-based insurance in the U.S. since 2000. According to a report issued last year by the Kaiser Commission on Medicaid and the Uninsured, 27 million American workers are uninsured. Of them, 77% hold full-time jobs, and 49% are self-employed or work for small businesses.

People running these businesses are forced to find creative options for health care, Darien says. That results in a tattered patchwork of coverage across the U.S. Prominent agriculture states like Texas, Florida, and California tend to have the highest rates of uninsured workers. The states with the lowest number, according to the Kaiser report, are Minnesota, Vermont, Hawaii, and Wisconsin.


  Darien says that NASE members have taken various approaches to finding health care for themselves and their employees. "Some choose to set up health savings accounts. Others purchase expensive private insurance through groups like the AARP," she says. Others simply go without and keep their fingers crossed, hoping to hang onto good health until their companies get larger or legislation eases the burden on them.

The health-insurance crunch stifles would-be entrepreneurial ventures and stymies the growth of many microbusinesses, whose owners may decide against hiring employees altogether. Those who do hire find themselves at a huge disadvantage when trying to attract quality workers.

Other problems arise: "Many of our business owners cannot bring their spouses into their rapidly growing companies because they rely on the health insurance provided by the spouse's corporate job," Darien notes.

There is some movement on the health-insurance front legislatively. Massachusetts recently passed a law aimed at covering that state's uninsured population (see BW Online, 4/4/06, "In Massachusetts, Health Care for All?"). The Kaiser Commission has a downloadable fact sheet on that effort. And the Self-Employed Health Care Affordability Act of 2006, H.R. 4961, has recently been introduced in the U.S. House of Representatives.


  Darien says the NASE is still reviewing the Massachusetts law and has taken no position on pending legislation. "We know that the whole idea of employers providing health coverage has to change," she says. "That inherently puts smaller businesses at a big disadvantage in terms of their scale alone. There has to be an adjustment."

Meanwhile, to provide practical help to the microbusiness community while the policy debate continues, the NASE has recently launched an initiative that includes an educational Web site focused on helping microbusiness owners understand their options. "The initiative is designed to help business owners navigate the issue while Congress works to come up with a permanent solution," Darien says.

The site,, includes a free, downloadable guide to health care with plain, easy-to-follow information tailored specifically to microbusiness owners. Says Darien: "We are constantly getting a multitude of calls, questions, and concerns from members and nonmembers. They don't know why costs are rising or how they can deal with it. This is our attempt to emphasize options for entrepreneurs, so they can meet their health-care needs in the most cost-effective, comprehensive ways possible."

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