Over the past three years, Craig Jolicoeur has worked at four different companies. Although all of them were startups, they took radically different approaches when it came to providing health insurance coverage to their employees.
The first company, in Needham, Mass., paid the entire cost of health insurance premiums for its single employees, and half the cost of family coverage. The second one, in Cambridge, was even more generous, picking up the full cost of premiums for both types of coverage, with no employee contribution required.
“I was pretty surprised to even find a company that does that, especially a startup company,” said Jolicoeur, 28, a software developer who works out of his home in Johnston.
The situation was radically different at Jolicoeur’s third company, based in Indiana; employees there were offered no health insurance at all. His current employer, an Australia-based startup, does not have a group coverage plan, so the company gave him a $5,000 “health bonus” to put toward purchase of a plan on the individual market. The annual premium for his Blue Cross Blue Shield family coverage is nearly $10,000, so Jolicoeur’s employers pay about half the cost of the premium.
As Jolicoeur’s experience shows, there is no single approach to health insurance coverage for startups and other small businesses. But, like all employers, they must deal with the soaring cost of premiums, which have gone up 78 percent nationwide since 2001, according to the Kaiser Family Foundation.
The situation is particularly vexing for startups, which have limited cash flow as they get off the ground, and rarely have enough employees to qualify for a discounted group rate.
Only 65 percent of Rhode Island companies with 3 to 9 employees offered health insurance in 2005, down from 70 percent in 1997, according to a survey by the Office of the R.I. Health Insurance Commissioner. By comparison, health coverage was offered by 98 percent of companies with 50 or more workers and 86 percent of those with 10 to 49 employees, the study found.
Yet small employers also said providing health benefits is “extremely important” to attracting and retaining good employees, as well as improving productivity.
“It’s a very tough investment, because a lot of times a startup business needs the money to finance the startup, and generally the health care gets neglected,” said John Cronin, executive director of the Rhode Island Small Business Development Center at Johnson & Wales University. The average yearly costs of family coverage for small businesses are equal to the annual salary for someone earning minimum wage, according to the commissioner’s office.
Cronin recommends that small firms try to save on premium costs by obtaining coverage through their local chamber of commerce or a professional association.
John Gregory, president and CEO of the Northern Rhode Island Chamber of Commerce, called health insurance “a mandatory option.”
“You don’t have to have health insurance, but obviously it’s something that you would probably want, especially for an entrepreneur with a young family,” Gregory said. In addition, more entrepreneurs are starting new businesses in their 40s or 50s, an age when health concerns are more important, he said.
Gregory also noted that a set of changes to state health laws passed in 2000 took away the right of small employers to group together to purchase health insurance. The law’s proponents hoped the package would make health coverage more affordable for small businesses, but the 2005 study showed little evidence of that.
Some businesspeople are now starting to think a universal health care program could be the answer to the problem, according to Cronin. “But how to do universal is where it becomes more of a policy challenge,” he said.
Jolicoeur, whose wife stopped working after their son was born earlier this year, said becoming a father has made health insurance much more important to him. However, he noted that many startups hire young people who will be less concerned about health coverage.
“I think a lot of tech people my age are more interested in salary and stock options at this stage in life,” he said.
Cronin said the same thinking that leads a person to start a new business may also lead him or her to shrug off health insurance coverage, particularly when it costs so much.
“Entrepreneurs are risk-takers by nature,” he said. “Their passion is to build a business. They’re generally healthy and positive people who feel they can overcome any risk in the health area, so they usually … are not getting the health insurance until they have the financing.” •
