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Why Are Small Businesses Dropping Health Insurance? Posted: December 11th, 2009

By Sanford Ellowitz

Sanford Ellowitz is a New York State licensed insurance agent. He is also a Certified Financial Planner and a Certified Employee Benefit Specialist. He has over 25 years experience in the insurance and financial services industries.

More small businesses drop health insurance, leaving many without health benefits.

Empire BlueCross BlueShield recently reported a sharp rise in the number of small businesses that are terminating their health insurance coverage. It found between 30% and 50% of businesses are dropping coverage, a rate far higher than in other years when about 1% discontinued their plans.

Small businesses, which are particularly sensitive to price increases, have seen their insurance premiums increase by 15% this year--compared to a 7.7% increase for large firms.

With no slow down in the cost of medical care expected soon, this trend is expected to continue.

Job Growth Is in Small Businesses

Most of the jobs in the United States are being created by small businesses, many of which do not offer coverage. In 2007, about one-half of workers in small businesses had no coverage, compared to only 26% of employees who lacked coverage at large firms.
As a result of rising premiums, the number of employers not offering health care coverage is expected to increase the number of people without any health insurance.

Medical Bills Could Result in Bankruptcy

This can present a problem for the employees of small businesses. A 2009 study, by the Harvard Medical School, suggests that over 60% of the bankruptcies in this country are the result of medical bills. It is estimated that 1.5 million people, most of them middle class and well educated, may declare bankruptcy this year alone.

Whether it is medical bills alone or some other financial problem, the root cause of bankruptcy could not be determined. However, high medical bills are a major factor in the decision to file bankruptcy.

Not having health insurance can be a serious problem even if it doesn't lead to bankruptcy. Many families struggle with their health care costs, even if they do manage to pay their bills.

Securing Health Insurance Coverage

If you're one of the employees of a small business, which has discontinued its health benefits, you should get health insurance quotes. Comparing quotes and getting the right coverage may help protect you and your family from the possible consequences of high medical bills.

Sanford Ellowitz