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health cost on the rise

Small businesses by now are used to having their health-care costs rise much faster than large corporations. And new survey results suggest 2009 will be no different. In fact, things are so tough that an increasing number of small firms are expected to dump their health benefits altogether.

Preliminary results of the annual health-insurance survey by Mercer, a benefits consultant, show that health-insurance costs for all employers will rise about 5.7% in 2009 – the lowest annual rise in the past decade. But small employers – those with 10 to 499 employees – expect their health costs jump 10% next year.

PopoutMercer says companies, small and large, are expected to fight off the increases by continuing to pass along the costs to employees. About 19% say they will add a high-deductible health plan, such as a health savings account or a health reimbursement arrangement. Those plans often cost about 20% less than typical medical plans like HMOs or PPOs, Mercer said in a news release.

Despite the cost-savings tactics, a growing number of the smallest employers are expected to drop health-insurance coverage altogether, Mercer found. The number of small employers with 10 to 199 employees offering health insurance has fallen from 69% in 2001 to 61% in 2007.

No wonder when politicians and pundits talk about health-insurance reform these days, small businesses are center stage. The new generation of the “Harry and Louise” ad running this election season shows the married couple sitting around the breakfast table discussing how their friend who recently joined a start-up got diagnosed with cancer and doesn’t have insurance.


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