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October 11, 2005
Report: Cost of Benefits Higher for Small Biz

A new report found that the offering of benefits and their associated costs can vary significantly depending on company size. According to the Office of Advocacy of the U.S. Small Business Administration (SBA), about 40 percent of employees in the smallest firms were eligible for health insurance coverage during the survey period. That's far less than the 77 percent of employees in the largest firms who were eligible for coverage.

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The Office of Advocacy also found that the per-participant administrative costs of defined-contribution pension plans, such as 401(k) plans, were up to 14 times higher for the smallest firms than for their largest counterparts.

Citing the report, Senator Olympia J. Snowe (R-Maine) noted that small firms experienced a faster increase in health insurance premiums than larger firms from the mid-1990s to 2002. From 1997 to 2002, for example, the weighted average premium per enrolled employee rose more than 63 percent from $2,754 to $4,495 for firms with fewer than 10 employees, she said.

"[The] SBA report is another reminder that cost has moved affordable health care beyond reach for most small businesses in America today," Snowe said. "I have long pressed the Senate to act to pass commonsense association health plan [AHP] legislation to provide our small businesses--the engine of our economic resurgence--with the relief they so desperately need."

The Small Business Health Fairness Act of 2005, which Snowe introduced in February, would allow small businesses to pool together in AHPs to provide health insurance products that meet the specific needs of their members and their employees. On July 26, the House of Representatives passed its version of AHP legislation in a 263-to-165 vote. Snowe says she will push to ensure that her bill is voted on in the Senate this year.

To download the full SBA report, go to www.sba.gov/advo.

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