NCPA - National Center for Policy Analysis

Small Business Insurance Difficulties

June 20, 2002

"Micro-businesses" face problems in acquiring health insurance coverage, according to a survey by the National Association for the Self-Employed released at a June 18 Capitol Hill press conference. NASE President Robert Hughes said the average company surveyed has three employees, has been in business for 17 years, and has annual gross sales of $341,000.

Only 30 percent of the companies surveyed currently provide health insurance coverage to employees. The biggest reason for not providing coverage was cost -- 82.5 percent said the cost of coverage was "not reasonable" for their business, and 78 percent thought their employees could not "afford the cost sharing."

  • However, 83 percent said they would likely purchase coverage for themselves and 75 percent would likely purchase coverage for their employees -- if premiums were 100 percent deductible.
  • Tax credits were even more favored, with 86 percent saying they would buy coverage for themselves, and 79 percent for their employees, if there were a tax credit.
  • Medical Savings Accounts were less popular, but only 28 percent of the respondents were aware of the concept.
  • Once the idea was explained, 43 percent said they would be "interested" in the idea, and 27 percent would be "likely" to establish one for their employees.

Association Health Plans -- in which a group is formed to purchase insurance coverage -- attracted interest, with 78 percent saying they would be likely to participate if it lowered costs, and 75 percent saying they would participate if AHPs offered more choices.

Members of Congress participating in the press conference included Don Manzullo (R-Ill.) and Nydia Velazquez (D-N.Y.), Chair and Ranking Member of the Small Business Committee, Kay Granger (R-Texas), Albert Wynn (D-Md.), and Ernie Fletcher (R-Ky.). All spoke of how badly disadvantaged small businesses are by current federal tax and regulatory policy.

Source: Greg Scanlon, senior fellow in health policy, National Center for Policy Analysis, June 20, 2002.


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