Making Health Insurance More Affordable for Small Businesses

Comparative analysis of small vs. large group health care use and costs

Starting in September 1991, researchers at the Pittsburgh Research Institute, Pittsburgh, compared the health care costs and use for employees at small firms and individual health plan subscribers with employees at large firms.

The researchers sought to provide private insurers with the necessary empirical information to develop insurance products for small firms and individuals that were comparable in benefit design and price to those for larger firms.

They also sought to arm policymakers with data to evaluate the potential impact of various private health insurance market reform options.

Key Findings

  • Employees at small firms use health care services at a rate similar to employees at large firms.

  • Mid-sized firms (50 to 500 employees) actually had lower per-subscriber health care costs than either small or large firms.

  • These findings suggest that community rating—whereby insurers charge firms of all sizes a uniform premium rate based on community use of health care instead of the firm's employees' use of health care—would actually decrease insurance costs for many large firms.

  • Small firms would also see a decrease in insurance costs, while mid-sized firms, on average, would see their premiums rise.