News From the
Committee on Small Business
Nydia M. Velázquez, Chairwoman

For Immediate Release
March 14, 2007

CONTACT: Kate Davis, Austin Bonner (202) 225-4038

Committee Reviews State of Health Care for Small Business
Fewer small firms provide health insurance and those that do pay more for coverage

WASHINGTON – One of the biggest challenges currently facing entrepreneurs is a lack of health care coverage. Today, small business leaders and representatives from the health insurance industry discussed the reasons that small firms have difficulty providing coverage and potential solutions to this issue. This hearing marks the beginning of the committee’s work to make health care more affordable and available to this nation’s 26 million small businesses.

Entrepreneurs have been among the hardest hit in the health care crisis.  Of the 46 million Americans without health insurance, more than half live in a household headed by a small business owner or employee. Nearly all businesses with more than 200 employees offer coverage, but only 48 percent of the smallest firms do. While small businesses represent the majority of employers in this nation, it is clear they are having extreme difficulty in providing their employees with health care coverage.

“With so many entrepreneurs and their families struggling to access care today, reform must begin with the small business market if solutions to this country’s health care crisis are to be found,” Chairwoman Nydia M. Velázquez said. “Reform is vitally important to small businesses that need affordable health care to attract a talented workforce, help their employees stay healthy, and be competitive.”

The current structure of the health care market clearly reduces the ability of small businesses to purchases coverage.  Due to limited competition and few options when it comes to price and coverage, many small employers do not offer coverage. For those who can afford it, they also face the additional burden of limited purchasing power and higher administrative costs.  Small firms with very few employees face the greatest difficulty in obtaining coverage. Insurers often charge higher rates for these smaller firms because of the potential risk for high-cost claims that could reduce or eliminate any profits for the insurance company.

“The high cost of health care is a serious obstacle for small businesses that are trying to compete in the global marketplace,” Chairwoman Velázquez said. “We know small firms pay more per employee to provide health insurance than large firms and that many of our nation’s main job creators simply cannot afford it.  Meaningful reform that addresses these concerns is a necessity, and this committee will be working to find a solution to this ongoing crisis.”

Representatives of small businesses and the insurance industry described a number of possible solutions to the unique problems small businesses face in the insurance market.  Potential approaches include changing the tax treatment of health insurance, exploring reinsurance options, and expanding pooling options available to small businesses.  The committee also heard testimony on several state health insurance reform initiatives and how these changes are affecting entrepreneurs’ overhead costs and their ability to offer coverage.

“It is clear from today’s testimony that changes are needed to make offering health care coverage an affordable option for small businesses,” said Chairwoman Velázquez. “This is the direction the economy is headed, and reforms need to be targeted to ensure a healthy workforce now and in the future.”

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