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Health costs hinder small business hiring, study finds

February 07 2014

One third of small firms say they are purposefully not growing as a result of the Affordable Care Act, according to The 2014 Small Business Health Care Survey released by the National Small Business Association.

Survey participants were asked, “Are you restructuring your workforce in any way due to the Affordable Care Act?” Responses include:

  • I am not restructuring my workforce due to the Affordable Care Act: 48 percent
  • Not growing: 33 percent
  • Subcontracting more projects out instead of hiring on employees: 15 percent
  • Hiring more part-time versus full-time employees: 14 percent
  • Reducing hours for existing employees: 10 percent
  • Considering leasing employees: 7 percent
  • May utilize a professional employer organization (PEO): 2 percent

The majority of employers surveyed said offering health insurance is very important to recruiting good employees, but just 51 percent of the smallest firms offer health benefits. Among the 70 percent of small firms overall that do offer health insurance, the majority report paying for more than half of the cost of their employees’ plans.

Ninety-one percent reported increases in their health plan at their most recent health insurance renewal, with one in four reporting increases exceeding 20 percent.

“Cost is the No. 1 driver of whether or not a small business will offer health insurance,” said NSBA President Todd McCracken. “These costs have real-world implications: one-third of small businesses held off on hiring a new employee and more than half say they held off on salary increases for employees.”

The survey found the average monthly per-employee cost of health insurance premiums for a small firm is $1,121. When asked in 2009 for the estimated monthly cost of their health benefits package, it was just $590 per employee. However, the percentage of respondents who said they offer any health-related benefits to their employees increased from 66 percent in 2009 to 70 percent in 2013’s survey.

The survey was conducted online Nov. 20 and Dec. 4, 2013 among more than 780 small-business owners with fewer than 500 employees.

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