Small businesses bear the brunt of insurance cost increases

Small businesses, employers of 40 percent of the workforce, are facing high costs for employees' health insurance.

A consultant interviewed by the New York Times reported that his small business clients were paying 15 percent to 23 percent more for coverage renewals. Last year their increases were close to 10 percent. Under this math, insurance that costs $4,800 per employee in 2009 would cost $5,500 for 2010, the Times says.

Analysts suggested that the insurance industry is raising premiums because of concern about future profits, in light of pending health care legislation. New laws may provide a government insurance subsidy that would, in effect, compete with private insurance companies.

Those companies are suggesting that higher premiums can be blamed on the prices that hospitals and doctors are charging them. The insurance industry has blasted Medicare and other government programs, claiming that they don't reimburse doctors or hospitals adequately. As a result, insurers say, companies buying employees' insurance must pick up the slack.

Small businesses are particularly hard-hit because they lack large companies' power to negotiate prices with insurers.

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Posted: October 29, 2009

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