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November 1st: Torsten Jacobi, CEO of Creative Weblogging, joins host Anita Campbell. Sponsored by Six Disciplines. Show details.
Tuesday, March 30, 2004
Health Insurance and Very Small Business
Medpundit writes that as a solo practitioner physician, the cost of providing health insurance coverage for her employees is more than she can afford.

She believes small businesses are disincented to provide insurance, at least in her area (in the Midwest USA). Employer-provided health insurance premiums are two to four times more expensive than individual policies. Her employees could purchase individual policies, but she is prohibited from contributing to the premiums on their behalf.

As we noted here, the smaller the business, the less likely it will offer health benefits, due to cost. Unfortunately Medpundit, as a very small business with two employees, is in the category of employer where lack of coverage is most prevalent.

When a business has five or fewer employees, the typical health coverage strategies really break down. The economics of a pooled association plan may not make sense because of membership fees. And even many PEOs (professional employer organizations) shy away from employers with under 6 employees, again because of the economics. High deductible plans coupled with HSAs can be good solutions in some situations, but they are not for everyone and may require funding accounts up front.

This business demographic (5 or fewer employees) is ripe for a better health insurance solution. Perhaps one day a health insurer or other provider can figure out a new economic model that works for very small businesses in the U.S.
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