Employee Health Costs Rising

Smaller employers continue to offer benefits despite a 30 percent hike in insurance prices, a study shows.

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Despite rising health insurance costs in recent years, most small businesses continue to offer the same level of employee benefits, a new study shows.

Between 2000 and 2005, employee insurance costs rose by 30 percent for businesses with fewer than 25 employees, according to a joint report by the Kauffman Foundation, a Kansas City, Mo.-based entrepreneurship advocacy group, and the RAND Corporation, a Santa Monica-Calif.-based research group. Because businesses of this size tend to require participation in insurance plans, they were most affected by higher insurance prices, researchers said.

Yet, over the same five-year period, the number of small businesses offering benefits remained steady, dropping by less than 1.5 percent, the study found.

"Perhaps these small businesses -- and ultimately, their employees -- were willing to accept the burden of rising health insurance costs, even if it meant giving up wage increases," Christine Eibner, an associate economist at RAND, said in a statement. "What we don't know is whether small companies and their employees will continue to make this tradeoff," she added.

The study, which was based on a survey of more than 2,500 businesses nationwide, also found that smaller businesses were slightly less likely to offer dental or drug coverage than larger firms, and often had higher deductibles.

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