Monday, April 19, 2010

Case Study: "Small Business" Savings

This is one case study for a small business, as defined by the Small Business Administration. It is a "large" business by health care reform standards. It has 90 employees and $4M in payroll.

On average, the insurance premiums cost $9,600 per employee. The employee contributes $3,300 of that amount and the company contributes $6,300, plus almost another $1,000 per employee for HSA contributions. This is a combination of $1,000 deductible plans and a higher deductible ($2500 with HSA) plan.

If the reform penalty was available this year, the company would save over $500,000. That's a lot of money for re-investment into growth and possible adding more jobs.

Let's project to 2014, and assume a moderate 10% increase in costs each year.

The employee will be spending $4,832. They will have a choice of paying this amount in premiums (and still paying their out of pocket costs), or paying a penalty of $695.

The company will be spending $9,198, plus $1000 for an HSA contribution. If they take the $2,000 penalty, putting the employees on the market for insurance through an exchange, they will save $775,000 roughly. That could be a lot of jobs.

If someone has a better plan to save that kind of money on corporate expenses for a small business, that doesn't include dropping health insurance coverage for its employees, please speak up.

I've not heard anything from US Chamber, NFIB, or any other small business advocates that compares with this option.

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