Small business owner, health insurance expert?

By Andrea Hopkins

CINCINNATI (Reuters) - Mike Cavanaugh is an electrician by trade, but once a year he immerses himself in the U.S. health insurance industry in an increasingly futile search for affordable medical coverage for his 25 employees.

"I'm not necessarily qualified to make the best decision for all these employees about the best prescription plan, the best co-pays, but I've got to do it," said Cavanaugh, president of Queen City Electric in Cincinnati.

"Health insurance is my single largest cost in benefits, and costs are rising by a minimum of 15 percent a year ... so I shop around every year."

While much of the focus on America's troubled health care system has focused on the struggle by big business to contain soaring costs, America's 25 million small businesses -- employing 52 percent of America's private-sector workforce -- are far less likely to offer employees any insurance at all.

Only 60 percent of firms with between 3 and 199 employees offer health insurance, down from 68 percent in 2000 and well below the 98 percent coverage offered by large firms, according to the nonprofit Kaiser Family Foundation.

As a result, self-employed and small business owners, their employees and families make up 27 million of the America's 45 million uninsured, making health insurance the most coveted benefit for Americans in the job hunt.

With premiums for family coverage up 87 percent nationally since 2000, employers like Cavanaugh say they have been forced to cut coverage wherever they can.

Five years ago Cavanaugh covered 100 percent of his employees' premiums, but has cut that to 80 percent for single employees and 60 percent for family coverage. That still cost him about $55,000 in 2006. His employees pay the rest.

"Health care is such a pain in the butt," said Doug Holthaus, an electrician who's worked for Cavanaugh since 2000. He pays about $200 a month in premiums to cover himself, his wife, and teenage son and daughter.

Holthaus, 43, said Cavanaugh's constant search for cheaper insurance is the biggest pain, since it means employees may have to change doctors or learn a new claims process.

"Mike's got to do what he's got to do, but it's a vicious circle ... after a year or two the insurers jack the rates and the company wants to look elsewhere. And we change again."

GOVERNMENT HELP? YES! NO!

Small businesses often lack leverage to get the best deal on insurance, said Michelle Dimarob, a health care lobbyist at the National Federation of Independent Business, and their smaller risk pools can work against them.

"If you've got six people and one person gets cancer, it's going to affect your policy and premium a lot more than if one person at a 600-person company gets sick," Dimarob said.

The paperwork battle and complexity of comparing insurance plans can also overwhelm small business owners, said Kaiser Family Foundation analyst Gary Claxton.