NAIC Survey: Small Businesses Unprepared, Overwhelmed in Planning for Health Insurance

A two-thirds majority of small businesses are overwhelmed when trying to choose health insurance coverage for their employees, and one-third say they simply cannot afford to do so, according to a survey conducted by the National Association of Insurance Commissioners.

Approximately 64% of those surveyed said they lack confidence in selecting a plan that fits their budgets and employees' needs. The survey polled 500 small business decision-makers from July 22-31.

These results show a gap in understanding of the fiscal responsibilities of offering health insurance. Some 60% said they do not have a clear understanding of the tax implications of paying for a portion of employees' health insurance premiums and only 27% said they understand all the factors that can affect their small group premiums.

The results, even amid a national debate over health care reform, show a need for greater insurance education, said NAIC President and New Hampshire Insurance Commissioner Roger Sevigny.

"In this economic environment, small business owners need to be especially mindful of any decision that will affect their financial future," Sevigny said in a statement. "Now, more than ever, it is important they get smart about their choices and consider the implications that making a bad decision could have on their business and their employees' future."

The NAIC suggests several tips for small businesses considering their health care choices, including surveying employees to determine what coverage is important to them; learning what factors influence the cost of small group coverage in their state; and taking advantage of any tax benefits. The NAIC recommends business owners consult several licensed agents specializing in health insurance for small businesses.

In a July letter to Rep. Henry Waxman, D-Calif., chairman of the House Committee on Energy and Commerce, and Rep. Frank Pallone, D-N.J., chairman of the Health Subcommittee, House Committee on Small Business Chairwoman Nydia M. Velázquez, D-N.Y., said it is important to ensure that small business owners will benefit from any final health care reform legislation.

Velázquez urged a high revenue cutoff level for determining which businesses would be mandated to cover their employees or pay a fee. Businesses below that level would be exempt.