Risky business: when mom and pop buy health insurance for their employees.

The economics of small group insurance makes offering health benefits to employees a risky business. Surveys of employers from 1989 to 2003 reveal that more rapid premium increases are forcing small firms to impose higher cost-sharing. In 2003, premiums for small firms (3-199 workers) increased 15.5 percent, outpacing the 13.2 percent increase for large firms (200+ workers). From 2000 to 2003, deductibles among small firms increased 100 percent in PPO plans when employees use in-network providers and 131 percent when they use out-of-network providers; among large firms, deductibles in PPO plans increased 33 percent and 44 percent, respectively. And in 2003, 40.3 percent of employees in the smallest firms contributed 41 percent or more of the total family premium, compared with only 11.2 percent of employees in large firms. Clearly, fundamental change in the small employer market is necessary, including new options for helping small firms gain access to the advantages large firms have in purchasing health benefits.