New Data Show Nation's Smallest Businesses Battling High Health Care Costs Despite Some Improvements Since '05

Business Wire,  June 16, 2008  

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-- Fewer Companies Offering Insurance for Employees, More Feeling An Impact on Bottom Line --

WASHINGTON -- The National Association for the Self-Employed (NASE) today released data from the only national survey to measure the impact of rising healthcare costs on micro-businesses and the self-employed. The survey of nearly 4,000 micro-businesses, a follow-up to research conducted in 2005, shows that high cost continues to be the most significant barrier to offering health insurance and that small businesses strongly feel they are at a disadvantage compared to their larger counterparts when it comes to access to coverage.

"While we do see some encouraging data this year, the fact remains that access to health care is the most significant issue facing this country's smallest businesses," said Kristie Darien, Executive Director of the NASE. "The baker, the house painter, and the 20 million other micro-businesses in the United States already are struggling to survive in this economy. These businesses could be further threatened if we cannot find a way to make insurance more affordable."

Numbering over 24 million, micro-businesses often are cited as the drivers of America's economic engine, creating well over a third of all new jobs. The data collected in the NASE survey were segmented to explore key differences among respondents, including number of employees and total 2007 gross sales, both critical factors in determining the impact of rising health care costs on a business.

Survey Highlights - Coverage

* About two-thirds (67%) of respondents say they have personal health insurance coverage, a notable increase from the 54.9% who reported the same in 2005. (p. 10)

* In a surprising shift, the percentage of responding businesses whose plans cover full-time employees dropped significantly from 46.2% in 2005 to 18.6% in 2008. (p. 17)

* Companies with gross sales under $50,000 experienced the greatest increase in access to health care coverage - 40% presently offer insurance compared to only 13.8% in 2005. (p. 15)

Survey Highlights - Cost

* More than 65% cite cost as the single most significant barrier to offering health insurance to employees. (p. 16)

* Results show a significant increase in the percentage spent on health insurance premiums since 2005, with median costs rising from 3.7% of total revenue to 5.5%. (p. 19)

* One in 10 of the 2008 respondents spend 25% or more of their gross revenue on health insurance, compared to 10.1% in 2005, representing a 48.6% increase. (p. 19)

* Overall, costs have increased an average of 14.7%, compared to a 20.7% increase in 2005. (p. 21)

* Two issues respondents feel have the greatest impact on high health care costs are "insurance companies making too much profit" (28.8%) and "doctors/hospitals charging too much for services" (21.7%). (p. 24)

The survey also shows that small businesses with the least end up paying the most in terms of health insurance costs. Micro-businesses grossing less than $50,000 annually spend a median of 17.6% of their gross 2007 sales on health insurance, compared to a median of only 1% spent annually by companies generating more than $500,000 annually.

While most respondents (59%) say the company pays the entire premium for health insurance, it is becoming more common for employees to not only be responsible for a share of their premium, but also pay a larger proportion. The average amount of the premium employees have to pay increased to 87% in 2008 compared to 64.5% in 2005. As reported in the previous survey, the smallest companies (in terms of revenue) are most likely to implement a cost sharing approach.

More than 1,300 survey respondents offered additional comments on the issue of access to health insurance and other issues that impact the health care environment. Following is a sample of those comments:

[TABLE OMITTED]

For complete survey results or to obtain a copy of the NASE survey report, please contact Lori Russo at 202-223-4933, lrusso@stantoncomm.com

About the NASE

The National Association for the Self-Employed (NASE) is the nation's leading resource for the self-employed and micro-businesses, bringing a broad range of benefits to help entrepreneurs succeed and to drive the continued growth of this vital segment of the American economy. The NASE is a 501(c) (6) non-profit organization and provides big-business advantages to hundreds of thousands of micro-businesses across the United States. For more information, visit the association's web site at www.NASE.org.

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