Small Firms Trim Health Coverage

Fewer than half of small businesses surveyed by a California bank provide health coverage for their workers, according to a report to be released today.

For the first time in the six years Union Bank of California has conducted its informal survey of small businesses in the state, companies that offer health insurance were a minority. Just 48.5% said they provide coverage, down from 53.1% in 2003.

The bank surveyed nearly 2,000 businesses in California with annual sales below $5 million; two-thirds of them were Union Bank customers.

“At the small-business level, we’re seeing a real decline” in healthcare coverage, said Barbara Hoose, the bank’s executive vice president of small-business services.

And of those that offer coverage, about 18% increased the share of costs paid by workers, 8% reduced benefits and 25% of the firms did both.

Small businesses in Southern California are more likely to offer coverage than firms elsewhere in the state, the report said.

In Los Angeles County, 50.7% said they offer health plans and in Orange County, where a low unemployment rate creates more competition for workers, the share was 53.2%. But in Riverside and San Bernardino counties, 49.3% of the firms offer medical coverage, which is closer to the state average.

Although all employers, including large companies, are struggling with rising healthcare costs, small businesses are particularly vulnerable because they have fewer resources, Hoose said.

“They care a lot about their employees,” she said. “They know their children, their situations ... so I’m sure that decisions to drop coverage or pass on costs are heartbreaking.”

The results match the findings of other recent reports. A Kaiser Family Foundation survey in the fall found that 60% of businesses nationally offered health insurance last year, down from 69% in 2000.

And a UCLA study released in August found that 54.5% of adults in California were covered by company-sponsored health insurance in 2003, down 2 percentage points from 2001.

E. Richard Brown, director of the UCLA Center for Health Policy Research, said small and large employers respond differently to rising healthcare costs.

Small firms are more likely to drop medical insurance completely, while large companies are more likely to offer it but cut coverage, raise premiums or tighten eligibility, Brown said. These steps may discourage some eligible workers from signing up for medical insurance.

“It’s a very vicious set of dynamics,” he said, and “calls into question the long-term survival of employer-based coverage.”