Increasing Costs

• The most significant problem with group health insurance policies for small business owners and their employees is the drastically increasing cost. Many insurance carriers have double-digit premium increases every year, making health insurance cost increases significantly higher than the average inflation rate and average salary increase. Since the premiums for most group health insurance plans are paid in portion by the company and the employees, the substantially increased costs continue to be a problem for everyone involved.
  
  

Decreasing Benefits

• One of the only ways to combat increasing health insurance costs for your small business is to decrease the level of coverage your plan provides to employees. To reduce health insurance costs, or simply maintain your prior year's premium, you must make adjustments to the group health insurance plan that will increase treatment costs for your employees. By paying for a larger portion of their care, the employees will have a lower monthly premium but may experience difficulty accumulating the necessary funds required for major medical procedures. This is a significant problem for your workers who need expensive treatment, as the potential consequences of delaying treatment could severely threaten their quality of life.
  
  

Participation Requirements

• Most states have participation requirements that must be met before your company can offer a group health insurance plan. A specific percentage of eligible full-time employees must actually take the plan offered by your company, or demonstrate existing group coverage elsewhere. If too many workers decline to participate in your company's plan, the entire group may be deemed ineligible, which is extremely problematic for those people who planned on purchasing the plan. The most common reason eligible employees will choose not to participate in your group plan is that the cost is more than they can afford.
  
  

Employer Contribution

• Since most states require that employers contribute a portion of each employee's health insurance premium, the continually rising cost of providing health insurance becomes more difficult to handle if your net profits do not increase by an acceptable percentage. Each state's insurance laws are slightly different, but most states require employers to contribute at least ten percent of your employee's insurance cost. Many employers contribute more than the minimum, but as prices rise, your ability to pay for health insurance and still maintain a profitable organization may diminish. Your company will eventually have to make a decision to decrease the employer percentage and pass along a portion of the increased costs to employees, threatening the financial stability of your workforce or reduce the quality of the plan to keep the premium within affordable limits.
  
  

Average Age of Group

• Group health insurance policies are priced, in part, based on the average age of the group. If your company employs a significant number of older workers, the price that everyone pays will be higher. Insurance companies realize that older people tend to require more frequent and more expensive treatment, so premiums are increased to account for these additional expenses. This fact can be a problem if you've employed workers for many years, or if one of your company's partners is much older than the majority of the workforce.