Broker fees, administrative costs blamed for high small biz premiums

Health insurance costs for small businesses are driven up in part by high broker fees and health plan administrative costs, according to a new government report.

Broker fees of up to 10% of premiums and administrative costs, which are three to four times those in the large group market, make it difficult for small business owners to offer coverage, according to the report from the U.S. Department of Health and Human Services and the U.S. Small Business Administration.

This has left small business owners in a financially untenable situation, having to choose between their employees, who are often like family to them, and the bottom line, SBA Administrator Karen Mills said. Health care reform will provide small business owners with greater access to the affordable, quality coverage they want and need for themselves and their employees.

Citing a survey from the Council of Economic Advisers, the credit report finds that nearly three-quarters of small businesses that did not offer benefits cited high premiums as the reason and on average, small firms pay up to 18% more than large firms for the same health coverage.

Because of increased costs, employees at small businesses are 50% more likely to lose their coverage as workers at large firms, the report said.

The report examines the current state of health care in America, which the bureaus say has left employees at risk of losing their insurance and underscores the financial difficulties small businesses face when providing health insurance to their employees, according to a joint statement.

Among the findings in the report, entitled Insurance at Risk: Small Business Employees Risk Losing Coverage are that employer-based premiums have more than doubled since 2000 and by 2019, will increase 166%, resulting in a cost burden of $28,530 per employee. The report also found that for firms employing less than 10 workers, 57% offered coverage in 2000 compared to 46% this year.

More Americans who work for a small business have lost their health insurance coverage, and those who still have coverage have seen their costs go up, said HHS Secretary Kathleen Sebelius in a statement. A  Health insurance reform will drive costs down and make it easier for small business owners to give their employees the quality coverage they need.

The report comes as the House and Senate work to pass comprehensive health care reform legislation to send to President Barack Obama. The report, without mentioning the plans specifically, says reform efforts will both strengthen employer-based insurance by reining in premiums and make health care coverage portable, affordable and accessible in part through a health insurance exchange to compare prices and health plans.