Max Chafkin | Inc. magazine

Small Businesses Lag Large Firms on Health Care

 

August 22, 2005--Employees of small businesses have access to fewer benefits than employees of large companies, according to a study released Thursday by the Small Business Administration's Office of Advocacy. The study also found that the smallest firms pay more money per employee for health coverage and retirement benefits than the largest firms.

From 1997 to 2002, the increase in health care costs hit companies of all size, causing the percentage of workers with health coverage at firms with between 25 and 99 employees to drop from 54.2% to 50.4%. Firms with between 100 and 999 employees saw that share fall from 62.1% to 57.8%.

The smallest companies, those with under 10 employees, were by far the hardest hit by these cost hikes, seeing per-employee costs increase by 63.2%, compared with a 53.4% increase for firms with 10 to 25 employees and a 49.8% increase for the 25 to 99 category. The largest companies, those with over 1000 employees, experienced the smallest percentage increase in costs, 42.4%.

While Office of Advocacy spokesman John McDowell said that the survey results were unsurprising, he added that the data would serve as a cue to Congress as Republicans and Democrats scramble to address concerns about the rising cost of healthcare. "Policymakers need to know how to understand how their policies are affecting small firms," he said. While Republicans and right-leaning lobby groups like the National Federation for Independent Business (NFIB) have advocated reform of medical liability laws as a solution, Democrats, notably New York Senator Hillary Clinton, have argued that the government should do more to absorb the costs and improve efficiency.

Senior contributing writer Max Chafkin has profiled companies such as Yelp, Zappos, Twitter, Threadless, and Tesla for the magazine. He lives in Brooklyn, New York. @chafkin